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.
-Using risk-neutral probabilities,the calculated price of a one-year call option on KD stock with a strike price of $20 is closest to:

• A)$1.45.
• B)$2.40.
• C)$2.00.
• D)$2.15.

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Definitions:

Persuasiveness

The ability to convince others to accept a certain viewpoint, idea, or action through reasoning or argument.

Competence

The ability and capacity to perform a specific task or role successfully, demonstrating knowledge, skill, and experience.

Managerial Skill

The abilities and competencies that enable a manager to plan, direct, organize, and control work activities.

Katz

A reference to Daniel Katz, a psychologist known for his work in organizational behavior, particularly regarding motivations and attitudes of employees.