Use the Information for the Question(s) Below

question 6

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 a down state for KD industries is closest to:

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

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Definitions:

Color Vision Theories

The explanations and hypotheses that describe how the human eye perceives colors, including the trichromatic and opponent-process theories.

Trichromatic Theory

A theory of color vision that explains how humans perceive color through the response of three types of cones sensitive to different wavelengths.

Retinex Theory

A theory that suggests the human brain perceives colors in a scene in a way that is independent of lighting by comparing different spectral wavelengths.

Sound Waves

Sound waves are vibrations that travel through the air or another medium, which can be heard when they reach a person's or animal's ear.