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 the binomial pricing model, the calculated price of a one-year put option on KD stock with a strike price of $20 is closest to:

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 the binomial pricing model, the calculated price of a one-year put option on KD stock with a strike price of $20 is closest to:

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section20.A: The Black-scholes Option Pricing Model

Problem 1P

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