Bait 'n Tackle started paying dividends 4 years ago. The annual dividends thus far have been $.50, $.55, $.60, and $.65, respectively. What is the arithmetic average dividend growth rate?

Question

Quizplus · Accepted Answer

We can use the formula for arithmetic average growth rate: 
Arithmetic average growth rate = (Ending value / Beginning value)^(1/n) - 1 
Where n is the number of years

Beginning value = $.50 
Ending value = $.65 
n = 4

Arithmetic average growth rate = ($.65 / $.50)^(1/4) - 1 
Arithmetic average growth rate = 0.0914 or 9.14%

Therefore, the answer is C- 9.14%.

Bait 'N Tackle Started Paying Dividends 4 Years Ago