Use the Information for the Question(s)below

question 31

Multiple Choice

Use the information for the question(s) below.
The current price of KD Industries stock is $20.In the next year the stock price will either go up by 20% or go down by 20%.KD pays no dividends.The one-year risk-free rate is 5% and will remain constant.
-Using the binomial pricing model,the calculated price of a one-year put option on KD stock with a strike price of $20 is closest to:

• A)$2.00.
• B)$1.45.
• C)$2.40.
• D)$2.15.

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Definitions:

Problem-Solving Skills

The ability to find solutions for challenging situations or obstacles effectively.

Intelligence Quotient

A measure of a person's cognitive abilities in relation to their age group, typically assessed through standardized tests.

William Stern

A German psychologist best known for developing the concept of the intelligence quotient (IQ).

Alfred Binet

A French psychologist who, along with Theodore Simon, developed the first practical IQ test, the Binet-Simon scale, pioneering intelligence testing.