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.

Question

Quizplus · Accepted Answer

The Answer of 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.

Use the Information for the Question(s)below