Alexis owns stock in a company which has consistently paid a growing dividend over the last 10 years. The first year Alexis owned the stock, she received $4.50 per share and in the 10th year, she received $4.92 per share. What is the growth rate of the dividends over the last 10 years?
A) 15 percent
B) 14.8 percent
C) 12.2 percent
D) 9.3 percent

Question

Quizplus · Accepted Answer

The growth rate of the dividends can be calculated using the formula for compound annual growth rate (CAGR), which is $CAGR = \left(\frac{FV}{PV}\right)^{\frac{1}{n}} - 1$, where FV is the final value ($4.92), PV is the initial value ($4.50), and n is the number of periods (10 years). Plugging in the values gives a growth rate of approximately 0.9% per year, which over 10 years accumulates to approximately 9.3%, making option D correct.

Alexis Owns Stock in a Company Which Has Consistently Paid