Professional Level Options Module

Time allowed
Reading and planning: 15 minutes
Writing: 3 hours
This paper is divided into two sections:
Section A BOTH questions are compulsory and MUST be attempted
Section B TWO questions ONLY to be attempted
Formulae and tables are on pages 812.
Do NOT open this paper until instructed by the supervisor.
During reading and planning time only the question paper may
be annotated. You must NOT write in your answer booklet until
instructed by the supervisor.
This question paper must not be removed from the examination hall.
P
a
p
e
r

P
4
Advanced Financial
Management
Tuesday 12 June 2012
The Association of Chartered Certified Accountants
Section A BOTH questions are compulsory and MUST be attempted
1 Nente Co, an unlisted company, designs and develops tools and parts for specialist machinery. The company was
formed four years ago by three friends, who own 20% of the equity capital in total, and a consortium of five business
angel organisations, who own the remaining 80%, in roughly equal proportions. Nente Co also has a large amount
of debt finance in the form of variable rate loans. Initially the amount of annual interest payable on these loans was
low and allowed Nente Co to invest internally generated funds to expand its business. Recently though, due to a rapid
increase in interest rates, there has been limited scope for future expansion and no new product development.
The Board of Directors, consisting of the three friends and a representative from each business angel organisation,
met recently to discuss how to secure the companys future prospects. Two proposals were put forward, as follows:
Proposal 1
To accept a takeover offer from Mije Co, a listed company, which develops and manufactures specialist machinery
tools and parts. The takeover offer is for $295 cash per share or a share-for-share exchange where two Mije Co shares
would be offered for three Nente Co shares. Mije Co would need to get the final approval from its shareholders if either
offer is accepted;
Proposal 2
To pursue an opportunity to develop a small prototype product that just breaks even financially, but gives the company
exclusive rights to produce a follow-on product within two years.
The meeting concluded without agreement on which proposal to pursue.
After the meeting, Mije Co was consulted about the exclusive rights. Mije Cos directors indicated that they had not
considered the rights in their computations and were willing to continue with the takeover offer on the same terms
without them.
Currently, Mije Co has 10 million shares in issue and these are trading for $480 each. Mije Cos price to earnings
(P/E) ratio is 15. It has sufficient cash to pay for Nente Cos equity and a substantial proportion of its debt, and
believes that this will enable Nente Co to operate on a P/E level of 15 as well. In addition to this, Mije Co believes
that it can find cost-based synergies of $150,000 after tax per year for the foreseeable future. Mije Cos current profit
after tax is $3,200,000.
The following financial information relates to Nente Co and to the development of the new product.
Nente Co financial information
Extract from the most recent income statement
$000
Sales revenue 8,780
Profit before interest and tax 1,230
Interest (455)
Tax (155)
Profit after tax 620
Dividends Nil
Extract from the most recent statement of financial position
$000
Net non-current assets 10,060
Current assets 690

Total Assets 10,750

Share capital (40c per share par value) 960

Reserves 1,400
Non-current liabilities: Variable rate loans 6,500
Current liabilities 1,890

Total liabilities and capital 10,750

2
In arriving at the profit after tax amount, Nente Co deducted tax allowable depreciation and other non-cash expenses
totalling $1,206,000. It requires an annual cash investment of $1,010,000 in non-current assets and working
capital to continue its operations.
Nente Cos profits before interest and tax in its first year of operation were $970,000 and have been growing steadily
in each of the following three years, to their current level. Nente Cos cash flows grew at the same rate as well, but it
is likely that this growth rate will reduce to 25% of the original rate for the foreseeable future.
Nente Co currently pays interest of 7% per year on its loans, which is 380 basis points over the government base
rate, and corporation tax of 20% on profits after interest. It is estimated that an overall cost of capital of 11% is
reasonable compensation for the risk undertaken on an investment of this nature.
New product development (Proposal 2)
Developing the new follow-on product will require an investment of $2,500,000 initially. The total expected cash
flows and present values of the product over its five-year life, with a volatility of 42% standard deviation, are as
follows:
Year(s) Now 1 2 3 to 7 (in total)
Cash flows ($000) (2,500) 3,950
Present values ($000) (2,029) 2,434
Required:
Prepare a report for the Board of Directors of Nente Co that:
(i) Estimates the current value of a Nente Co share, using the free cash flow to firm methodology; (7 marks)
(ii) Estimates the percentage gain in value to a Nente Co share and a Mije Co share under each payment offer;
(8 marks)
(iii) Estimates the percentage gain in the value of the follow-on product to a Nente Co share, based on its cash
flows and on the assumption that the production can be delayed following acquisition of the exclusive rights
of production; (8 marks)
(iv) Discusses the likely reaction of Nente Co and Mije Co shareholders to the takeover offer, including the
assumptions made in the estimates above and how the follow-on products value can be utilised by
Nente Co. (8 marks)
Professional marks will be awarded in question 1 for the presentation, structure and clarity of the answer.
(4 marks)
(35 marks)
3 [P.T.O.
2 Three proposals were put forward for further consideration after a meeting of the executive directors of Ennea Co to
discuss the future investment and financing strategy of the business. Ennea Co is a listed company operating in the
haulage and shipping industry.
Proposal 1
To increase the companys level of debt by borrowing a further $20 million and use the funds raised to buy back share
capital.
Proposal 2
To increase the companys level of debt by borrowing a further $20 million and use these funds to invest in additional
non-current assets in the haulage strategic business unit.
Proposal 3
To sell excess non-current haulage assets with a net book value of $25 million for $27 million and focus on offering
more services to the shipping strategic business unit. This business unit will require no additional investment in
non-current assets. All the funds raised from the sale of the non-current assets will be used to reduce the companys
debt.
Ennea Co financial information
Extracts from the forecast financial position for the coming year
$m
Non-current assets 282
Current assets 66

Total assets 348

Equity and liabilities

Share capital (40c per share par value) 48
Retained earnings 123

Total equity 171

Non-current liabilities 140

Current liabilities 37

Total liabilities 177

Total liabilities and capital 348

Ennea Cos forecast after tax profit for the coming year is expected to be $26 million and its current share price is
$320 per share. The non-current liabilities consist solely of a 6% medium term loan redeemable within seven years.
The terms of the loan contract stipulates that an increase in borrowing will result in an increase in the coupon payable
of 25 basis points on the total amount borrowed, while a reduction in borrowing will lower the coupon payable by
15 basis points on the total amount borrowed.
Ennea Cos effective tax rate is 20%. The companys estimated after tax rate of return on investment is expected to
be 15% on any new investment. It is expected that any reduction in investment would suffer the same rate of return.
Required:
(a) Estimate and discuss the impact of each of the three proposals on the forecast statement of financial
position, the earnings and earnings per share, and gearing of Ennea Co. (20 marks)
(b) An alternative suggestion to proposal three was made where the non-current assets could be leased to other
companies instead of being sold. The lease receipts would then be converted into an asset through securitisation.
The proceeds from the sale of the securitised lease receipts asset would be used to reduce the outstanding loan
borrowings.
Required:
Explain what the securitisation process would involve and what would be the key barriers to Ennea Co
undertaking the process. (5 marks)
(25 marks)
4
Section B TWO questions ONLY to be attempted
3 Sembilan Co, a listed company, recently issued debt finance to acquire assets in order to increase its activity levels.
This debt finance is in the form of a floating rate bond, with a face value of $320 million, redeemable in four years.
The bond interest, payable annually, is based on the spot yield curve plus 60 basis points. The next annual payment
is due at the end of year one.
Sembilan Co is concerned that the expected rise in interest rates over the coming few years would make it increasingly
difficult to pay the interest due. It is therefore proposing to either swap the floating rate interest payment to a fixed
rate payment, or to raise new equity capital and use that to pay off the floating rate bond. The new equity capital
would either be issued as rights to the existing shareholders or as shares to new shareholders.
Ratus Bank has offered Sembilan Co an interest rate swap, whereby Sembilan Co would pay Ratus Bank interest
based on an equivalent fixed annual rate of 376% in exchange for receiving a variable amount based on the current
yield curve rate. Payments and receipts will be made at the end of each year, for the next four years. Ratus Bank will
charge an annual fee of 20 basis points if the swap is agreed.
The current annual spot yield curve rates are as follows:
Year One Two Three Four
Rate 25% 31% 35% 38%
The current annual forward rates for years two, three and four are as follows:
Year Two Three Four
Rate 37% 43% 47%
Required:
(a) Based on the above information, calculate the amounts Sembilan Co expects to pay or receive every year on
the swap (excluding the fee of 20 basis points). Explain why the fixed annual rate of interest of 376% is
less than the four-year yield curve rate of 38%. (6 marks)
(b) Demonstrate that Sembilan Cos interest payment liability does not change, after it has undertaken the swap,
whether the interest rates increase or decrease. (5 marks)
(c) Discuss the factors that Sembilan Co should consider when deciding whether it should raise equity capital
to pay off the floating rate debt. (9 marks)
(20 marks)
5 [P.T.O.
4 Tisa Co is considering an opportunity to produce an innovative component which, when fitted into motor vehicle
engines, will enable them to utilise fuel more efficiently. The component can be manufactured using either process
Omega or process Zeta. Although this is an entirely new line of business for Tisa Co, it is of the opinion that developing
either process over a period of four years and then selling the productions rights at the end of four years to another
company may prove lucrative.
The annual after-tax cash flows for each process are as follows:
Process Omega
Year 0 1 2 3 4
After-tax cash flows ($000) (3,800) 1,220 1,153 1,386 3,829
Process Zeta
Year 0 1 2 3 4
After-tax cash flows ($000) (3,800) 643 546 1,055 5,990
Tisa Co has 10 million 50c shares trading at 180c each. Its loans have a current value of $36 million and an average
after-tax cost of debt of 450%. Tisa Cos capital structure is unlikely to change significantly following the investment
in either process.
Elfu Co manufactures electronic parts for cars including the production of a component similar to the one being
considered by Tisa Co. Elfu Cos equity beta is 140, and it is estimated that the equivalent equity beta for its other
activities, excluding the component production, is 125. Elfu Co has 400 million 25c shares in issue trading at 120c
each. Its debt finance consists of variable rate loans redeemable in seven years. The loans paying interest at base rate
plus 120 basis points have a current value of $96 million. It can be assumed that 80% of Elfu Cos debt finance and
75% of Elfu Cos equity finance can be attributed to other activities excluding the component production.
Both companies pay annual corporation tax at a rate of 25%. The current base rate is 35% and the market risk
premium is estimated at 58%.
Required:
(a) Provide a reasoned estimate of the cost of capital that Tisa Co should use to calculate the net present value
of the two processes. Include all relevant calculations. (8 marks)
(b) Calculate the internal rate of return (IRR) and the modified internal rate of return (MIRR) for Process Omega.
Given that the IRR and MIRR of Process Zeta are 266% and 233% respectively, recommend which
process, if any, Tisa Co should proceed with and explain your recommendation. (8 marks)
(c) Elfu Co has estimated an annual standard deviation of $800,000 on one of its other projects, based on a normal
distribution of returns. The average annual return on this project is $2,200,000.
Required:
Estimate the projects Value at Risk (VAR) at a 99% confidence level for one year and over the projects life
of five years. Explain what is meant by the answers obtained. (4 marks)
(20 marks)
6
5 Kilenc Co, a large listed company based in the UK, produces pharmaceutical products which are exported around the
world. It is reviewing a proposal to set up a subsidiary company to manufacture a range of body and facial creams in
Lanosia. These products will be sold to local retailers and to retailers in nearby countries.
Lanosia has a small but growing manufacturing industry in pharmaceutical products, although it remains largely
reliant on imports. The Lanosian government has been keen to promote the pharmaceutical manufacturing industry
through purchasing local pharmaceutical products, providing government grants and reducing the industrys corporate
tax rate. It also imposes large duties on imported pharmaceutical products which compete with the ones produced
locally.
Although politically stable, the recent worldwide financial crisis has had a significant negative impact on Lanosia. The
countrys national debt has grown substantially following a bailout of its banks and it has had to introduce economic
measures which are hampering the countrys ability to recover from a deep recession. Growth in real wages has been
negative over the past three years, the economy has shrunk in the past year and inflation has remained higher than
normal during this time.
On the other hand, corporate investment in capital assets, research and development, and education and training,
has grown recently and interest rates remain low. This has led some economists to suggest that the economy should
start to recover soon. Employment levels remain high in spite of low nominal wage growth.
Lanosian corporate governance regulations stipulate that at least 40% of equity share capital must be held by the
local population. In addition at least 50% of members on the Board of Directors, including the Chairman, must be
from Lanosia. Kilenc Co wants to finance the subsidiary company using a mixture of debt and equity. It wants to raise
additional equity and debt finance in Lanosia in order to minimise exchange rate exposure. The small size of the
subsidiary will have minimal impact on Kilenc Cos capital structure. Kilenc Co intends to raise the 40% equity
through an initial public offering (IPO) in Lanosia and provide the remaining 60% of the equity funds from its own
cash funds.
Required:
(a) Discuss the key risks and issues that Kilenc Co should consider when setting up a subsidiary company in
Lanosia, and suggest how these may be mitigated. (15 marks)
(b) The directors of Kilenc Co have learnt that a sizeable number of equity trades in Lanosia are conducted using
dark pool trading systems.
Required:
Explain what dark pool trading systems are and how Kilenc Cos proposed Initial Public Offering (IPO) may
be affected by these. (5 marks)
(20 marks)
7 [P.T.O.
8
Formulae
Modigliani and Miller Proposition 2 (with tax)
Two asset portfolio
The Capital Asset Pricing Model
The asset beta formula
The Growth Model
Gordons growth approximation
The weighted average cost of capital
The Fisher formula
Purchasing power parity and interest rate parity
k k T)(k k
V
V
e e
i
e
i
d
d
e
= + ( ) 1
s w s w s w w r s s
p a
2
a
2
b
2
b
2
a b ab a b
= + + 2
E(r R E(r R
i f i m f
) ( ) ) = +

a
e
e d
e
d
e d
V
V V T))
V T
V V
=
+

+
+ ( (
( )
( ( 1
1
1 T))
d

P
D g)
(r g)
o
o
e
=
+ (

1
g br
e
=
WACC
V
V V
k
V
V V
k
e
e d
e
d
e d
d
=
+

+
+

( 1 TT)
( ) ( 1 1 + = + i r)(1+h)
S S x
(1+h
(1+h
F S x
(1+i
(1
1 0
c
b
0 0
c
= =
)
)
)
++i
b
)
9 [P.T.O.
Modified Internal Rate of Return
The Black-Scholes option pricing model
The Put Call Parity relationship
c PN(d P N(d e
Where:
d
P P r+
a 1 e 2
rt
1
a e
=
=
+
) )
ln( / ) ( 00.5s t
s t
d d s t
2
2 1
)
=
MIRR
PV
PV
r
R
I
n
e
=

+
( )
1
1 1
p c P P e
a e
rt
= +
10
Present Value Table
Present value of 1 i.e. (1 + r)
n
Where r = discount rate
n = number of periods until payment
Discount rate (r)
Periods
(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 0990 0980 0971 0962 0952 0943 0935 0926 0917 0909 1
2 0980 0961 0943 0925 0907 0890 0873 0857 0842 0826 2
3 0971 0942 0915 0889 0864 0840 0816 0794 0772 0751 3
4 0961 0924 0888 0855 0823 0792 0763 0735 0708 0683 4
5 0951 0906 0863 0822 0784 0747 0713 0681 0650 0621 5
6 0942 0888 0837 0790 0746 0705 0666 0630 0596 0564 6
7 0933 0871 0813 0760 0711 0665 0623 0583 0547 0513 7
8 0923 0853 0789 0731 0677 0627 0582 0540 0502 0467 8
9 0941 0837 0766 0703 0645 0592 0544 0500 0460 0424 9
10 0905 0820 0744 0676 0614 0558 0508 0463 0422 0386 10
11 0896 0804 0722 0650 0585 0527 0475 0429 0388 0305 11
12 0887 0788 0701 0625 0557 0497 0444 0397 0356 0319 12
13 0879 0773 0681 0601 0530 0469 0415 0368 0326 0290 13
14 0870 0758 0661 0577 0505 0442 0388 0340 0299 0263 14
15 0861 0743 0642 0555 0481 0417 0362 0315 0275 0239 15
(n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0901 0893 0885 0877 0870 0862 0855 0847 0840 0833 1
2 0812 0797 0783 0769 0756 0743 0731 0718 0706 0694 2
3 0731 0712 0693 0675 0658 0641 0624 0609 0593 0579 3
4 0659 0636 0613 0592 0572 0552 0534 0516 0499 0482 4
5 0593 0567 0543 0519 0497 0476 0456 0437 0419 0402 5
6 0535 0507 0480 0456 0432 0410 0390 0370 0352 0335 6
7 0482 0452 0425 0400 0376 0354 0333 0314 0296 0279 7
8 0434 0404 0376 0351 0327 0305 0285 0266 0249 0233 8
9 0391 0361 0333 0308 0284 0263 0243 0225 0209 0194 9
10 0352 0322 0295 0270 0247 0227 0208 0191 0176 0162 10
11 0317 0287 0261 0237 0215 0195 0178 0162 0148 0135 11
12 0286 0257 0231 0208 0187 0168 0152 0137 0124 0112 12
13 0258 0229 0204 0182 0163 0145 0130 0116 0104 0093 13
14 0232 0205 0181 0160 0141 0125 0111 0099 0088 0078 14
15 0209 0183 0160 0140 0123 0108 0095 0084 0074 0065 15
1 0990 0980 0971 0962 0952 0943 0935 0926 0917 0909 1
2 0980 0961 0943 0925 0907 0890 0873 0857 0842 0826 2
3 0971 0942 0915 0889 0864 0840 0816 0794 0772 0751 3
4 0961 0924 0888 0855 0823 0792 0763 0735 0708 0683 4
5 0951 0906 0863 0822 0784 0747 0713 0681 0650 0621 5
6 0942 0888 0837 0790 0746 0705 0666 0630 0596 0564 6
7 0933 0871 0813 0760 0711 0665 0623 0583 0547 0513 7
8 0923 0853 0789 0731 0677 0627 0582 0540 0502 0467 8
9 0914 0837 0766 0703 0645 0592 0544 0500 0460 0424 9
10 0905 0820 0744 0676 0614 0558 0508 0463 0422 0386 10
11 0896 0804 0722 0650 0585 0527 0475 0429 0388 0350 11
12 0887 0788 0701 0625 0557 0497 0444 0397 0356 0319 12
13 0879 0773 0681 0601 0530 0469 0415 0368 0326 0290 13
14 0870 0758 0661 0577 0505 0442 0388 0340 0299 0263 14
15 0861 0743 0642 0555 0481 0417 0362 0315 0275 0239 15
1 0901 0893 0885 0877 0870 0862 0855 0847 0840 0833 1
2 0812 0797 0783 0769 0756 0743 0731 0718 0706 0694 2
3 0731 0712 0693 0675 0658 0641 0624 0609 0593 0579 3
4 0659 0636 0613 0592 0572 0552 0534 0516 0499 0482 4
5 0593 0567 0543 0519 0497 0476 0456 0437 0419 0402 5
6 0535 0507 0480 0456 0432 0410 0390 0370 0352 0335 6
7 0482 0452 0425 0400 0376 0354 0333 0314 0296 0279 7
8 0434 0404 0376 0351 0327 0305 0285 0266 0249 0233 8
9 0391 0361 0333 0308 0284 0263 0243 0225 0209 0194 9
10 0352 0322 0295 0270 0247 0227 0208 0191 0176 0162 10
11 0317 0287 0261 0237 0215 0195 0178 0162 0148 0135 11
12 0286 0257 0231 0208 0187 0168 0152 0137 0124 0112 12
13 0258 0229 0204 0182 0163 0145 0130 0116 0104 0093 13
14 0232 0205 0181 0160 0141 0125 0111 0099 0088 0078 14
15 0209 0183 0160 0140 0123 0108 0095 0084 0074 0065 15
11 [P.T.O.
Annuity Table
Present value of an annuity of 1 i.e.
Where r = discount rate
n = number of periods
Discount rate (r)
Periods
(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 0990 0980 0971 0962 0952 0943 0935 0926 0917 0909 1
2 1970 1942 1913 1886 1859 1833 1808 1783 1759 1736 2
3 2941 2884 2829 2775 2723 2673 2624 2577 2531 2487 3
4 3902 3808 3717 3630 3546 3465 3387 3312 3240 3170 4
5 4853 4713 4580 4452 4329 4212 4100 3993 3890 3791 5
6 5795 5601 5417 5242 5076 4917 4767 4623 4486 4355 6
7 6728 6472 6230 6002 5786 5582 5389 5206 5033 4868 7
8 7652 7325 7020 6733 6463 6210 5971 5747 5535 5335 8
9 8566 8162 7786 7435 7108 6802 6515 6247 5995 5759 9
10 9471 8983 8530 8111 7722 7360 7024 6710 6418 6145 10
11 1037 9787 9253 8760 8306 7887 7499 7139 6805 6495 11
12 1126 1058 9954 9385 8863 8384 7943 7536 7161 6814 12
13 1213 1135 1063 9986 9394 8853 8358 7904 7487 7103 13
14 1300 1211 1130 1056 9899 9295 8745 8244 7786 7367 14
15 1387 1285 1194 1112 1038 9712 9108 8559 8061 7606 15
(n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0901 0893 0885 0877 0870 0862 0855 0847 0840 0833 1
2 1713 1690 1668 1647 1626 1605 1585 1566 1547 1528 2
3 2444 2402 2361 2322 2283 2246 2210 2174 2140 2106 3
4 3102 3037 2974 2914 2855 2798 2743 2690 2639 2589 4
5 3696 3605 3517 3433 3352 3274 3199 3127 3058 2991 5
6 4231 4111 3998 3889 3784 3685 3589 3498 3410 3326 6
7 4712 4564 4423 4288 4160 4039 3922 3812 3706 3605 7
8 5146 4968 4799 4639 4487 4344 4207 4078 3954 3837 8
9 5537 5328 5132 4946 4772 4607 4451 4303 4163 4031 9
10 5889 5650 5426 5216 5019 4833 4659 4494 4339 4192 10
11 6207 5938 5687 5453 5234 5029 4836 4656 4486 4327 11
12 6492 6194 5918 5660 5421 5197 4988 4793 4611 4439 12
13 6750 6424 6122 5842 5583 5342 5118 4910 4715 4533 13
14 6982 6628 6302 6002 5724 5468 5229 5008 4802 4611 14
15 7191 6811 6462 6142 5847 5575 5324 5092 4876 4675 15
1 (1 + r)
n

r
10368
11255
12134
13004
13865
10575
11348
12106
12849
10635
11296
11938
10563
11118 10380
12
Standard normal distribution table
000 001 002 003 004 005 006 007 008 009
00 00000 00040 00080 00120 00160 00199 00239 00279 00319 00359
01 00398 00438 00478 00517 00557 00596 00636 00675 00714 00753
02 00793 00832 00871 00910 00948 00987 01026 01064 01103 01141
03 01179 01217 01255 01293 01331 01368 01406 01443 01480 01517
04 01554 01591 01628 01664 01700 01736 01772 01808 01844 01879
05 01915 01950 01985 02019 02054 02088 02123 02157 02190 02224
06 02257 02291 02324 02357 02389 02422 02454 02486 02517 02549
07 02580 02611 02642 02673 02704 02734 02764 02794 02823 02852
08 02881 02910 02939 02967 02995 03023 03051 03078 03106 03133
09 03159 03186 03212 03238 03264 03289 03315 03340 03365 03389
10 03413 03438 03461 03485 03508 03531 03554 03577 03599 03621
11 03643 03665 03686 03708 03729 03749 03770 03790 03810 03830
12 03849 03869 03888 03907 03925 03944 03962 03980 03997 04015
13 04032 04049 04066 04082 04099 04115 04131 04147 04162 04177
14 04192 04207 04222 04236 04251 04265 04279 04292 04306 04319
15 04332 04345 04357 04370 04382 04394 04406 04418 04429 04441
16 04452 04463 04474 04484 04495 04505 04515 04525 04535 04545
17 04554 04564 04573 04582 04591 04599 04608 04616 04625 04633
18 04641 04649 04656 04664 04671 04678 04686 04693 04699 04706
19 04713 04719 04726 04732 04738 04744 04750 04756 04761 04767
20 04772 04778 04783 04788 04793 04798 04803 04808 04812 04817
21 04821 04826 04830 04834 04838 04842 04846 04850 04854 04857
22 04861 04864 04868 04871 04875 04878 04881 04884 04887 04890
23 04893 04896 04898 04901 04904 04906 04909 04911 04913 04916
24 04918 04920 04922 04925 04927 04929 04931 04932 04934 04936
25 04938 04940 04941 04943 04945 04946 04948 04949 04951 04952
26 04953 04955 04956 04957 04959 04960 04961 04962 04963 04964
27 04965 04966 04967 04968 04969 04970 04971 04972 04973 04974
28 04974 04975 04976 04977 04977 04978 04979 04979 04980 04981
29 04981 04982 04982 04983 04984 04984 04985 04985 04986 04986
30 04987 04987 04987 04988 04988 04989 04989 04989 04990 04990
This table can be used to calculate N(d), the cumulative normal distribution functions needed for the Black-Scholes model
of option pricing. If d
i
> 0, add 05 to the relevant number above. If d
i
< 0, subtract the relevant number above from 05.
End of Question Paper