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:

Non-Exchange Transactions

Transactions where an entity receives value without directly giving approximately equal value in exchange, often seen in government and non-profit organizations.

Equity Ownership

Refers to the holding of stock or shares in a company, representing a claim on the company's assets and earnings.

Net Debt

A measure of a company's financial leverage calculated as total debt minus cash and cash equivalents.

Government's Ability

The capacity of a governmental entity to implement its policies and execute its programs effectively.