- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 34. Valuation of Contingent Claims
- Subject 4. Black-Scholes-Merton Option Valuation Model

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**CFA Practice Question**

In the BSM model, if d is less than zero, we can conclude that N(d) is ______.

B. more than zero

C. less than 0.5

A. less than zero

B. more than zero

C. less than 0.5

Correct Answer: C

N(d) is simply the standard normal cumulative distribution function. The standard normal distribution has a mean of 0. If d is less than 0, that means the cumulative distribution is less than 0.5.

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