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.

Analyze the impact of technological advances on supply.

Determine the effects of taxes on market equilibrium.

Understand the concept of substitutes and how changes in prices affect demand.

Recognize how market expectations influence supply in the present.

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Definitions:

Indirect Ownership Interests

Ownership in a company that is mediated through another entity, such as owning a parent company that in turn owns subsidiaries.

Parent Ltd Indirect Interest

An ownership interest held by a parent company in a subsidiary through another subsidiary rather than directly.

Multiple Consolidation

The process of integrating financial statements from multiple subsidiaries into one aggregated set of financial statements for the parent company.