Use the Information for the Question(s)below

question 31

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

• A)$2.00.
• B)$1.45.
• C)$2.40.
• D)$2.15.

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Definitions:

Rule Consequentialism

A theory in moral philosophy that suggests the rightness or wrongness of an action should be judged by the conformity to a rule whose general observance would lead to the best consequences.

Empirical Investigation

A method of research that involves the collection and analysis of data through observation and experiment to test hypotheses or theories.

Ethical Action

Ethical action implies behavior that is morally right and beneficial, guided by ethical principles and considerations.

Pleasure

A sense of joy, pleasure, or contentment gained from a particular experience or activity.