In a stream of past dividends, the initial dividend is $0.75 and the most recent dividend is $1.25. The number of years between these two dividends (n) is 8 years. What is the average growth rate during this eight-year period?
Use a calculator to determine your answer.
A) 6.59%
B) 6.62%
C) 6.69%
D) 6.72%
Answer: A
Explanation: A) With N = 8, PV = -0.75, FV = 1.25, and PMT = 0, we get I/Y = 6.5936, or about 6.59%.
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