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Q3 Dec 2010

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Q3 Dec 2010

  • This topic has 1 reply, 2 voices, and was last updated 13 years ago by John Moffat.
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  • June 6, 2012 at 6:01 am #53143
    snake681218
    Member
    • Topics: 9
    • Replies: 6
    • ☆

    Hi, tutor:

    I am confused by the number of put options calculation in this question. Why use N(-d1) instead of N(d1)? my understanding is that since d1 is less than o, we shall use 0.5-data, so the N(d1) shall be 0.5-0.0219=0.4781, so the number of put options needed shall be : 200,000/(0.4781X1,000). am I wrong? why? pls advise. thanks

    June 6, 2012 at 12:28 pm #99268
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54787
    • ☆☆☆☆☆

    It is because the question tells you to assume that the delta is N(-d1).

    Since d1 is negative, -d1 is positive and so when using the normal distribution tables you add 0.5 to the table figure.

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