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Basic Question 0 of 10
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 |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
explain how the phase of the business cycle affects policy and short-term interest rates, the slope of the term structure of interest rates, and the relative performance of bonds of differing maturities;
describe the factors that affect yield spreads between non-inflation-adjusted and inflation-indexed bonds;
CFA® 2025 Level II Curriculum, Volume 6, Module 37.