Use the Information for the Question(s)below

question 41

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.
-Assuming the Beta on KD stock is 1.1,the calculated beta for a one-year call option on KD stock with a strike price of $20 is closest to:

• A)-1.8.
• B)2.4.
• C)-7.7.
• D)4.6.

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Definitions:

Money Expansion

The increase in the total quantity of money in circulation within an economy, often achieved through central banking policies.

Fed Officials

Members of the Federal Reserve, the central banking system of the United States, who are responsible for monetary policy decisions.

Rational Expectations Theory

A hypothesis proposing that individuals form forecasts about the future based on all available information in an unbiased and consistent manner.

Aggregate Output

Aggregate Output is the total value of all goods and services produced in an economy over a given period of time.