In a stream of past dividends,the initial dividend is $1.25 and the most recent dividend is $1.80.The number of years between these two dividends (n)is 7 years.What is the average growth rate during this seven-year period? Use a calculator to determine your answer.
A)4.35%
B)5.35%
C)6.35%
D)7.35%

Question

Quizplus · Accepted Answer

To calculate the average growth rate, we use the formula: [(Most recent dividend/Initial dividend)^(1/n)-1]*100%. Plugging in the given values, we get [(1.8/1.25)^(1/7)-1]*100% = 5.35%. Therefore, the answer is choice B.

In a Stream of Past Dividends,the Initial Dividend Is $1