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 call option on KD stock with a strike price of $20 is closest to:

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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 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 call option on KD stock with a strike
price of $20 is closest to:

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