Use the Information for the Question(s) Below

question 6

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 a down state for KD industries is closest to:

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

---

Definitions:

Cartilage

A flexible, connective tissue found in areas in the bodies such as the joints and the rib cage.

Inflammation

The body's response to injury or infection, often causing redness, warmth, swelling, and pain.

Articulation

The physical production of spoken sounds, or the point where two bones meet and move in relation to each other.

Joint

A structure in the body where two or more bones are connected, allowing for movement and support.