Question: 6. Quick Start Inc. is expected to pay a dividend of $1.05 next year and dividends are expected to continue their 7% annual growth rate.

6. Quick Start Inc. is expected to pay a dividend of $1.05 next year and dividends are expected to continue their 7% annual growth rate. The SML has been estimated as follows:

kj = 0.08 + 0.064j

Assuming Quick Start has a beta of 1.1, what would happen to its stock price if inflation expectations went from the current 5% to 8%?

a. It would decrease $8.14. b. It would decrease $3.55. c. It would decrease $3.18. d. The stock price will not change.

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