Use the Information for the Question(s)below

question 41

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.
-Assuming the Beta on KD stock is 1.1,the calculated beta for a one-year call option on KD stock with a strike price of $20 is closest to:

• A)-1.8.
• B)2.4.
• C)-7.7.
• D)4.6.

---

Definitions:

Operating Assets

Assets that are used in the daily operations of a business to generate revenue, such as machinery, buildings, and equipment.

Controllable Margin

The portion of income that remains after deducting controllable expenses, indicating the earning performance that management can influence.

Controllable Costs

Expenses that a manager or business has the power to influence or change in the short term.

Managerial Responsibility

The obligation of managers to make decisions and take actions that maximize the value and effectiveness of an organization.