Investors expect the following series of dividends from a particular common stock:
|
Year One
|
$1.10
|
|
2nd Year
|
$1.25
|
|
3rd Year
|
$1.45
|
|
4th Year
|
$1.60
|
|
5th Year
|
$1.75
|
After the fifth year, dividends will grow at a constant rate.
If the required rate of return on this stock is 9 percent and the current market price is $45.64, what is the long-term rate of dividend growth expected by the market?