Why should I choose AnalystNotes?
AnalystNotes specializes in helping candidates pass. Period.
Basic Question 0 of 27
The Gordon growth model assumes that:
II. the discount rate is greater than the growth rate.
III. the growth rate increases over time.
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.
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 |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
explain how interest rate volatility affects the value of a callable or putable bond;
explain how changes in the level and shape of the yield curve affect the value of a callable or putable bond;
calculate the value of a callable or putable bond from an interest rate tree;
CFA® 2025 Level II Curriculum, Volume 4, Module 28.