Use the Information for the Question(s) Below

question 14

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 an up state for KD industries is closest to:

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

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Definitions:

Organic Foods Market

A sector of the food industry that deals with products produced via farming practices which aim to promote ecological balance and conserve biodiversity, avoiding most synthetic pesticides and fertilizers.

Market Segment

A distinct group of potential consumers who share similar needs, desires, and characteristics, targeted by businesses for marketing campaigns.

Cost-based Pricing

Setting the price of a product or service based on the cost of production and distribution plus a markup for profit.

Market Penetration

A measure of the amount of sales or adoption of a product or service compared to the total theoretical market for that product or service.