Use the Information for the Question(s)below

question 8

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.
-The risk-neutral probability of an up state for KD Industries is closest to:

• A)37.5%.
• B)60.0%.
• C)40.0%.
• D)62.5%.

---

Definitions:

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board that guides the financial reporting for companies outside of the United States.

GAAP

Generally Accepted Accounting Principles, a common set of accounting rules and standards for financial reporting in the United States.

Pledging

The act of providing assets as security or collateral for a debt.

Assignment

A task or piece of work allocated to someone as part of a job or course of study.