Use the Information for the Question(s)below

question 38

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 risk-neutral probabilities,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)$2.15.
• C)$1.45.
• D)$2.40.

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Definitions:

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