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:

Excess Reserves

The funds that banks hold over and above the required reserve ratio set by the central bank.

Money Supply

The overall sum of financial resources present in an economy at a given moment.

Open Market Operations

are actions taken by central banks to buy or sell government securities in the open market to control the money supply and influence interest rates.

Federal Reserve Notes

The paper currency issued by the Federal Reserve System in the United States, serving as the nation's primary form of legal tender.