The dividend paid by a company in each year over an 8- year period rises gradually from 50p in the first year of the period to 75p in the final year. What is the average annual growth rate over the period?
A) 0.95%
B) 1.50%
C) 5.20%
D) 0.55%

Question

Quizplus · Accepted Answer

To calculate the average annual growth rate, we need to use the compound annual growth rate formula:
CAGR = (Ending Value / Beginning Value)^(1/Number of Years) - 1
In this case, the beginning value is 50p, the ending value is 75p, and the number of years is 8. Plugging those values into the formula, we get:
CAGR = (75/50)^(1/8) - 1
CAGR = 0.052 or 5.20%
Therefore, the best choice is C.

The Dividend Paid by a Company in Each Year Over