2015 CFA Program: Level I Errata

3 November 2015

To be fair to all candidates, CFA Institute does not respond directly to individual candidate inquiries. If
you have a question concerning CFA Program content, please contact CFA Institute
(info@cfainstitute.org) to have potential errata investigated. The eBook for the 2015 curriculum is
formatted for continuous flow, so the text will fit all screen sizes. Therefore, eBook page numbering
which is linked to section headsdoes not match page numbering in the print curriculum. Corrections
below are in bold and new corrections will be shown in red; page numbers shown are for the print
volumes.
The short scale method of numeration is used in the CFA Program curriculum. A billion is 109
and a trillion is 1012. This is in contrast to the long scale method where a billion is 1 million squared and a
trillion is 1 million cubed. The short scale method of numeration is the prevalent method internationally
and in the finance industry.
Volume 1
Reading 2: There are a number of corrections in this reading:
o In the last line of Example 12 (Using an Expert Network) of Standard II(A), p. 67 of print, The
fund sells its current position in the company and writes buys many put options
o The Comment on Example 5 (Disclosure of Referral Arrangements and Outside Parties) of
Standard VI(C) (page 164 of print) should read potential lack of objectivity in the
recommendation of Overseas is making by Arrow; this aspect
o In Exhibit 3, p. 172 of print, delete Level III CFA Candidate from the Improper References
column.
Reading 7: There are a number of corrections in this reading:
o In the paragraph immediately above Table 6 (p. 373 of print), there are five intervals spanning 5
percent to 10 percent (instead of six intervals and 4 percent).
o In Example 9, Solution to 2 (p. 399 of print), the first line of calculation for P75 should show
(38.25 38) in the brackets instead of (42.42 41.42). This applies to the first line only; the
remaining calculations are correct as shown.
o In the second paragraph below Table 16 (p. 393 of print), the calculation of the geometric mean
return should appear as: [1 + (0.006466)]5 = (0.993534)5 = $0.9681. The square brackets and
equal sign were omitted in first expression.
Reading 9: In the last sentence of Example 3 (p. 520 of print), the estimate for broker BB001 should
be 0.25 (instead of 25). In Equation 7 (p. 542 of print), the right-hand expression should be T, where
the T is not subscript.
Reading 10: In the solution to Practice Problem 8.A (p. 600 of print), the sample standard deviation
should equal 0.03266 (instead of 0.3266).
Reading 11: Solution to 2 of Example 9 (p. 637 of print) uses the variance of quadruple witching
days instead of triple. In the solution to Practice Problem 10.D (p. 654 of print), when calculating t,
the first expression should have a minus sign instead of equal: X 1 X 2

Volume 2
Reading 13: In the end-of-reading Practice Problems, delete questions 7 through 9 (p. 57 of print)
and their solutions (p. 60). They do not apply for this reading.
Reading 14: In Exhibit 12 (p. 81 of text), the horizontal axis should be labelled Ba and Ba instead of
Wb and Wb.

Reading 17: In Example 4 (p. 228 of print), change the federalprovincial government deficit to
84,249 (instead of 82,249) in the question and in the next-to-last paragraph of the solution. This
changes the domestic private saving to 69.5 percent (instead of 71 percent) and the excess imports
to C$25,661 (instead of 23,661).
Reading 18: Example 14 (p. 325 of print) currently provides two correct solutions. Therefore, make
the following edits:
Which of the following is not a problem true about NARU and NAIRU?
B is correct. The NARU and NAIRU may change over time. A is incorrect. C is incorrect
because those rates determine when an economy will experience bottlenecks in the labor market.
Reading 19: There are a number of corrections in this reading:
o In the middle of the third paragraph of Section 2.1.7 (bottom of p. 358 in print), insert not in
the parenthetical statement: (so long as inflation did not exceed 2 percent).
o In the first line below Exhibit 9 (p. 373 of print), change developing to developed
economies.
o In the lower third of the second paragraph under Exhibit 14 (p. 388 of print), make the following
edit: act as automatic stabilizers that would reduce the growing budget surplus increasing
budget surplus or reducing budget deficit.
o In the opening paragraph of Example 13 (p. 389 of print), the budget shortfall and associated
amount to borrow should be 149 bn (instead of 89 bn).

Volume 3
Reading 23: In Exhibit 2 (p. 45 of print), Minority Interest should be listed in the Owners Equity
section instead of the Liabilities section. In Exhibit 8 (p. 64 of print), the bolded sub-total of 150,000
should appear under Contributed Capital instead of Retained Earnings.
Reading 29: In the question stem of Practice Problem #19 (p. 419 of print), insert purchased
before finished goods.
Reading 32: In the calculation of Ericssons Debt-to-capital for 2008 (p. 554 of print), change 21,320
to 24,939 in the denominator.
Reading 34: In Exhibit 9 (pp. 665 and 666 of print), data in the Capital Lease columns were updated
but Operating Lease columns were not; therefore, operating lease data does not match that provided
in the previous exhibit. The required understanding is not affected by this error, however. Candidates
should use the numbers in Exhibit 9 and do any subsequent calculations as though the data are
correct. Candidates should delete Practice Problem 8 (p. 672) and its solution (p. 674). This question
is no longer assigned.
Volume 4
Reading 42: In the solution to Practice Problem 35 (p. 340 of print), change minimum-variance
frontier to efficient frontier in two places.
Reading 43: There are a number of edits to this reading. The first paragraph of Section 4.2 Security
Market Line (p. 365 of print) is re-written as follows:
In this subsection, we apply the CAPM to the pricing of securities. The security market line (SML)
is a graphical representation of the capital asset pricing model with beta, reflecting systematic risk, on
the x-axis and expected return on the y-axis. Using the same concept as the capital market line, the
SML intersects the y-axis at the risk-free rate of return, and the slope of this line is the market risk
premium, Rm Rf. Recall that the capital allocation line (CAL) and the capital market line (CML)
does not apply to all securities or assets but only to efficient portfolios on the efficient frontier. The
efficient frontier gives optimal combinations of expected return and total risk. In contrast, the security
market line applies to any security, efficient or not. The difference occurs because the CAL and the
CML use the total risk of the asset rather than its systematic risk. Because only systematic risk is
priced and the CAL and the CML are based on total risk, the CAL and the CML can only be applied

to those assets whose total risk is equal to systematic risk. Total risk and systematic risk are equal
only for efficient portfolios because those portfolios have no diversifiable risk remaining. We are able
to relax the requirement of efficient portfolios for the SML because the CAPM, which forms the basis
for the SML, prices a security based only on its systematic risk, not its total risk.
o Practice problem 1 (p. 384) and its solution (p. 390) should be revised as follows:
1. The line depicting the total risk and expected return of portfolio combinations of a risk-free asset
and any risky asset is the:
B is correct. A capital allocation line, CAL, plots the expected return and total risk of
combinations of the risk-free asset and a risky asset (or a portfolio of risky assets). The
combination of the risk-free asset and the market portfolio is a special case of the CAL, which is
the capital market line, CML.
Volume 5
Reading 48: The formula in Solution 12 (p. 184 of print) should show Pt-1 as the denominator,
instead of Pt. The solution was correctly calculated; only the subscript is changed.
Reading 50: In the solution to Practice Problem 4 (p. 286 of print), Both EV and FCFE Price to free
cash flow are forms of multiplier models.
Reading 55: There are a number of edits to this reading:
o In the paragraph immediately above Exhibit 1 (p. 515 of print), delete above: if a bond is
sold at a price above below its constant-yield
o In Equation 1 (p. 520 of print), the denominator of the first term should show (1 + r) instead of
1r (plus instead of minus).
o In the calculation of %PVFull immediately above Example 13 (p. 544 of print), the modified
duration value should be 29.498 (instead of 29.458) for a final solution of 0.029939.
o In the solution to Practice Problem #6 (bottom of p. 565 of print), reinvested cash flows are at
8% instead of 6%.
Reading 56: Delete practice problem #7 and its solution; this problem is no longer assigned.
Volume 6
Reading 57: In the second paragraph above Section 4.2.2 beginning Before leaving options (p.
30 of print), change the second sentence to read: With the former forward commitments, the parties
agree to trade an underlying asset at a later date
Reading 58: In Exhibit 3 (p. 65 of print), the last symbol in the formula for S0 should be gamma ()
instead of lambda.