The Reading Co.has adopted a policy of increasing the annual dividend on its ordinary equity at a constant rate of 3% annually.The last dividend it paid was €0.90 a share.What will the company's dividend be in six years?

Question

Quizplus · Accepted Answer

Dividend in one year = €0.90 x 1.03 = €0.927
Dividend in two years = €0.927 x 1.03 = €0.954
Dividend in three years = €0.954 x 1.03 = €0.981
Dividend in four years = €0.981 x 1.03 = €1.008
Dividend in five years = €1.008 x 1.03 = €1.036
Dividend in six years = €1.036 x 1.03 = €1.064, which rounds to €1.07. Therefore, the answer is D.