Dear All,
Please guide how to calculate the value of N(d1) in following example -
| Number of S.D. from Mean, | (z) Area of the left or right (one tail) |
| 0.25 | 0.4013 |
| 0.3 | 0.3821 |
| 0.55 | 0.2912 |
| 0.6 | 0.2578 |
Price of stock now = Rs.80
Exercise price = Rs.75
Standard deviation of continuously compounded annual
return = 0.40
Maturity period = 6 months
Annual interest rate = 12%
d1 = 0.5187
How to calculate value of N(d1) ,if the value of N(d1) is not given in question?
Hi,
Hope you find the solution useful.
d1=0.5816
To find Nd1:
d1=0.55 Nd1=0.2912(given in the sum)
and,d1=0.60 Nd1=0.2578
If LHS increase by 0.05 then RHS decrease by 0.0334
If LHS increase by 1 then RHS decrease by 0.0334/0.05=0.668
Again, if LHS increase by 0.0316 then RHS decrease by 0.668 X 0.0316=0.0211
d1=0.5816 Area to the right side=0.2912-0.0211=0.2701
so, Nd1=0.7299
regards,
thanks
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