CFA Practice Question

There are 96 practice questions for this study session.

CFA Practice Question

The Gordon growth model assumes that:

I. each future dividend is greater than the prior one.
II. the discount rate is greater than the growth rate.
III. the growth rate increases over time.
Correct Answer: II

User Contributed Comments 4

User Comment
noonah I is correct because the model assumes a constant growth rate of dividends, and that means each dvd is greater than the prior one.
rhardin I is NOT correct. Direct quote from the notes: "Dividends may fall at a constant rate indefinitely extending in the future..." In this case the formula will still be valid and g will be negative.
VenkatB good point rhardin..
chris54321 well done rhardin, you will definitely pass
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