CFA Practice Question

There are 191 practice questions for this study session.

CFA Practice Question

Franks Co. is currently paying a dividend of $2.20 per share. The dividends are expected to grow at 25% per year for the next four years and then 5% per year thereafter. Calculate the expected dividend in year 6.

A. $5.37
B. $2.95
C. $5.92
Correct Answer: C

2.2 x 1.254 x 1.052 = 5.92

User Contributed Comments 12

User Comment
haarlemmer Nothing wrong with the question. I just found the calculator is not the best choice. Maybe someday it could be adopted to a new one, I really find it is not handy to use.
danlan year 6 and not year 5, 1.05^2 and not 1.05,
gullan Dividend in year 6 means dividend at the end of year 6 as dividend is paid at the end of period
sam95 Keep on multipying the dividend by the growth rate for each year.AS it keeps on changing .i.e either try the given answer or simply try
2.2 x1.25 x1.25 x1.25 x1.25 x1.05 x1.05 =5.92
capitalpirate what's wrong with using the calculator??
capitalpirate 2.2 x 1.25^4 x 1.05^2 = 5.92
on TI, BAII, use 1.25 y^x 4 x 1.05 x^2...
moneyguy 2.20 * (1.25)^4 * (1.05)^2 = 5.9216
johntan1979 2.2 is Year 0
jonan203 HP12C:

2.2 <enter>
1.25 <enter>
4 <y^x><times>
1.05 <enter>
2 <y^x><times> = 5.9216
davcer save time, you just do the calculation 1.25exp*2.20 and get 5.37, since there are two periods left C is tne only possible answer
tochiejehu D4[1.25]^[1.05]^2
kseeba17 Stop relying on the calculator, it barely saves any time and it doesn't help you understand the fundamentals better. Use a normal calculator...
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