1/6/26, 9:25 PM FINC 3610 Exam 3
FINC 3610 Exam 3 2026 | ALL QUESTIONS AND
CORRECT ANSWERS | GRADED A+ | VERIFIED
ANSWERS | NEWEST VERSION (JUST RELEASED)
challenges in valuing stock:
- Not even promised cash flows are known in advance
- Life of investment essentially forever since stocks have no maturity date
- No way to easily observe the rate of return that the market requires
a company does __ have to pay dividends
NOT.
-ex. a startup company will try to raise the stock price instead of paying
dividends
price (value) of a BOND is = to the ___ value of the bond's future cash flows
present
price (value) of a SHARE OF STOCK is = to the present value of the stock's
________ cash flows
future
1/25
,1/6/26, 9:25 PM FINC 3610 Exam 3
companies can stop paying ___ whenever they want to
dividends
common stock cash flows:
1. dividends
2. price we sell it for
3 types of dividends:
1. no growth or zero growth
2. constant growth
3. non-constant growth
1. and 2. both use formulas
no growth or zero growth dividends (perpetuity)
dividends do not increase in dollar amount, they remain CONSTANT.
D1=D2=D3=D4=D5
with no growth/zero growth dividends, dividends are paid EVERY year __________
forever
formula for no growth/zero growth dividends:
PV0=D1/r
2/25
, 1/6/26, 9:25 PM FINC 3610 Exam 3
no growth/zero growth dividend example:
$10 dividend; 10% required return; what is price of share of stock?
$10/.10 = $100
constant growth dividends (growing perpetuity)
dividends increase at a fixed rate (g) each period
with constant growth dividends, dividends are paid __ period FOREVER
every
formula for constant growth dividends:
PV0=D1/r-g
constant growth dividend example:
$10 dividend; 8% required return; 5% growth; what is current stock price?
$10/.08-.05 = $333.33
3/25
FINC 3610 Exam 3 2026 | ALL QUESTIONS AND
CORRECT ANSWERS | GRADED A+ | VERIFIED
ANSWERS | NEWEST VERSION (JUST RELEASED)
challenges in valuing stock:
- Not even promised cash flows are known in advance
- Life of investment essentially forever since stocks have no maturity date
- No way to easily observe the rate of return that the market requires
a company does __ have to pay dividends
NOT.
-ex. a startup company will try to raise the stock price instead of paying
dividends
price (value) of a BOND is = to the ___ value of the bond's future cash flows
present
price (value) of a SHARE OF STOCK is = to the present value of the stock's
________ cash flows
future
1/25
,1/6/26, 9:25 PM FINC 3610 Exam 3
companies can stop paying ___ whenever they want to
dividends
common stock cash flows:
1. dividends
2. price we sell it for
3 types of dividends:
1. no growth or zero growth
2. constant growth
3. non-constant growth
1. and 2. both use formulas
no growth or zero growth dividends (perpetuity)
dividends do not increase in dollar amount, they remain CONSTANT.
D1=D2=D3=D4=D5
with no growth/zero growth dividends, dividends are paid EVERY year __________
forever
formula for no growth/zero growth dividends:
PV0=D1/r
2/25
, 1/6/26, 9:25 PM FINC 3610 Exam 3
no growth/zero growth dividend example:
$10 dividend; 10% required return; what is price of share of stock?
$10/.10 = $100
constant growth dividends (growing perpetuity)
dividends increase at a fixed rate (g) each period
with constant growth dividends, dividends are paid __ period FOREVER
every
formula for constant growth dividends:
PV0=D1/r-g
constant growth dividend example:
$10 dividend; 8% required return; 5% growth; what is current stock price?
$10/.08-.05 = $333.33
3/25
