Use the Information for the Question(s)below

question 8

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:

Systematic Desensitization

A therapeutic technique aimed at reducing anxiety through gradual exposure to the feared object or situation while using relaxation strategies.

Stepwise Regression

A statistical method of building a regression model by adding or removing predictors based on their statistical significance, in a step-by-step procedure.

Enclosed Spaces

Areas that are surrounded by boundaries or walls, often leading to feelings of confinement.

Cognitive Therapy

A psychotherapeutic approach aiming to change negative patterns of thinking to alter behavior and emotional states.