If the current dividend (D0) is $3.00 and the growth rate is 6%. How much will the dividend be at Time 5?

Multiple Choice

$4.015

$4.501

$6.00

$6.015

$6.501

To determine the dividend at Time 5 (D₅), we use the formula for a dividend that grows at a constant rate:

\[
D_t = D_0 \times (1 + g)^t
\]

Where:
- $D_0 = 3.00$ (the current dividend),
- $g = 6\% = 0.06$ (the growth rate),
- $t = 5$ (the time in years).

Now, plug the values into the formula:

\[
D_5 = 3.00 \times (1 + 0.06)^5
\]

\[
D_5 = 3.00 \times (1.06)^5
\]

\[
D_5 = 3.00 \times 1.3382 \approx 4.0146
\]

Therefore, the dividend at Time 5 is approximately **$4.015**.

The correct answer is:

**$4.015**

Would you like more details or have any questions?

Here are some related questions:
1. What happens to the dividend if the growth rate changes to 8%?
2. How would the formula change if there were different growth rates for different periods?
3. How would the dividend at Time 10 be calculated with the same 6% growth rate?
4. What if the dividend at Time 0 were $4.00 instead of $3.00, how would that affect the result?
5. Can this formula apply to other financial growths like stock prices?

**Tip:** Always express growth rates as decimals (e.g., 6% = 0.06) when using them in formulas.

If the current dividend (D0) is $3.00 and the growth rate is 6%, how much will the dividend be at Time 5?

Learn how to calculate the dividend at Time 5 when the initial dividend is $3.00 and the growth rate is 6%. This finance problem uses the formula for exponential growth to determine the future dividend. Perfect for students in Grades 10-12.

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