CFA Institute CFA-Level-I Exam - Topic 1 Question 5 Discussion

Actual exam question for CFA Institute's CFA-Level-I exam

Question #: 5
Topic #: 1

Assume an investor makes the following investments:

During year one, the stock paid a $5.00 per share dividend. In year 2, the stock paid a $7.50 per share dividend. The investorâ€™s required return is 35.0 percent.

The dollar-weighted return is:

A48.9%.

B16.1%.

C46.5%.

D102.4%.

Show Suggested Answer

Suggested Answer: A

by Joesph at Sep 15, 2024, 10:17 PM

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Cassandra

6 months ago

Required return is 35%, so anything over that is impressive!

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Merlyn

6 months ago

102.4%? That sounds way too high!

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Johnna

6 months ago

Definitely leaning towards option C, seems right.

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Sheridan

7 months ago

I think the dollar-weighted return is way off here.

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Novella

7 months ago

The dividends were $5.00 and $7.50.

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Brendan

7 months ago

I’m leaning towards option C, 46.5%, but I’m not completely confident. I wish I had practiced more on these types of calculations!

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Myra

7 months ago

If I recall correctly, the required return is quite high at 35%, which might skew the results. I hope I can remember the right steps to calculate it.

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Gertude

7 months ago

I think the dollar-weighted return is calculated by considering the cash flows and the timing of those dividends, but I’m a bit confused about the exact formula.

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Raymon

7 months ago

I remember we did a similar question on dollar-weighted returns in class, but I’m not sure how to apply it here.

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Tyisha

7 months ago

No problem, I've got this. I'll just plug the numbers into the formula and calculate the dollar-weighted return. Should be a breeze.

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Holley

7 months ago

Hmm, this seems straightforward enough. I'm pretty confident I can solve this using the formula for dollar-weighted return.

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Kimbery

7 months ago

Okay, let me think this through step-by-step. I'll need to consider the dividends paid in each year and the required return to figure out the right answer.

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Isadora

8 months ago

This looks like a tricky one. I'll need to carefully work through the calculations to determine the dollar-weighted return.

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Yuki

8 months ago

I'm a bit unsure about this one. The information provided seems clear, but I want to double-check my work to make sure I don't miss anything.

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Paris

8 months ago

Recruiting new team members and training is probably more relevant to the Acquire Team process, so I'm going to rule out D.

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Yvonne

2 years ago

This question is making my head spin like a fidget spinner. But I'm pretty sure the answer is C. 46.5%. Gotta love those tricky finance questions!

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Denny

2 years ago

I agree, C) 46.5% makes sense based on the investor's required return and the dividends received.

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Jessenia

2 years ago

Yeah, that calculation was a bit tricky, but C) 46.5% seems to be the correct answer.

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Chan

2 years ago

I think you're right, the answer is C) 46.5%.

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Curt

2 years ago

But the required return is 35.0 percent, so the answer should be A) 48.9%.

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Krystal

2 years ago

I disagree, I believe the answer is C) 46.5%.

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Ashley

2 years ago

D. 102.4%? That can't be right. The dividends and required return don't add up to that high of a return. I'm going with C.

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Glenn

2 years ago

I agree with you, C seems like the most logical choice based on the information given.

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Ilona

2 years ago

I'm not so sure, I still think D could be a possibility.

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Candra

2 years ago

I think you might be right, C does seem like a more reasonable option.

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Curt

2 years ago

I think the answer is A) 48.9%.

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Owen

2 years ago

Hmm, I'm not sure about this one. The dividends and required return seem a bit high. Maybe A or B is the correct answer?

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Timothy

2 years ago

I don't think D) 102.4% is the correct answer based on the information given.

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Cathern

2 years ago

I'm not sure either, but C) 46.5% could be a possibility.

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Denise

2 years ago

I'm leaning towards B) 16.1% as the correct answer.

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Mauricio

2 years ago

I think the answer might be A) 48.9%.

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Marg

2 years ago

The answer has to be C. 46.5%. The dividends and required return give us enough information to calculate the dollar-weighted return.

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Roxane

2 years ago

No, I believe it's C) 46.5%.

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Dierdre

2 years ago

I think the answer is A) 48.9%.

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