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

---

Definitions:

Temporal Conditioning

A type of conditioning in which the timing of the stimulus (rather than an overt physical stimulus) serves as the basis for the formation of an association, with reinforcement occurring at regular intervals.

Backward Conditioning

A conditioning process where the unconditioned stimulus is presented before the conditioned stimulus, often resulting in weaker associations.

CS

An abbreviation for Conditioned Stimulus, which is a previously neutral stimulus that, after being associated with an unconditioned stimulus, elicits a conditioned response.

UCR

An unconditioned response, which is an automatic or natural reaction to an unconditioned stimulus without prior conditioning.