A share pays a fixed dividend forever. Because that perpetuity never ends, you cannot compute its:
ADividend rate
BFuture value
CPresent value
DPayment size
Answer & Solution
Correct answer: B. Future value
1. A future value needs a fixed end point to compound towards.
2. A perpetuity has no end point at all.
3. So its future value cannot be determined, though its present value can.
_Source: OpenStax Principles of Finance 2e, Chapter 8, Time Value of Money II._
Keep practising Time Value of Money
Browse all Time Value of Money questions for CFA Level 1, or explore more Finance topics.