Go into Window->Path Finder from the tool bar.
The box you see has two rows of buttons. Experiement with them!
To cut out the N, make sure it has been turned into outlines and then select both objects. The second button at the top row of Pathfinder is remove top - click on it and then click on 'Expand'.
(When you use the pathfinder to cut/create shapes, it's undo-able until you click on expand).
Cheers