Use the Information for the Question(s)below

question 21

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 beta of a one-year put option on KD stock with a strike price of $20 is closest to:

• A)-7.7.
• B)2.4.
• C)4.6.
• D)-1.8.

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Definitions:

Strict Liability

A legal principle that holds a party responsible for damages or harm caused without the need to prove negligence or fault.

Contributory Negligence

A legal principle where the plaintiff is partially responsible for the harm caused and the compensation may be reduced accordingly.

Dry-Cleaning Chemicals

Dry-cleaning chemicals are solvents used in the dry-cleaning process to remove stains from fabrics without the use of water, commonly including perchloroethylene.

Vicarious Liability

The responsibility of one person or entity for the actions of another person, typically in an employer-employee relationship.