2011 CFA Program: Level I Errata 15 September 2011

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. Corrections below are in bold and new corrections will be shown in red. 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 edits in this reading: o The last sentence on p. 79 (Guidance for Standard III.C, Developing an Investment Policy) should state that members and candidates can assist instead of members and clients. o In the second line of problem 8 (p. 153), the management firm has been hired to work on an additional public offering (instead of initial public offering). o In the 14th line of Solution 17 (p. 166), Answer C (instead of Answer B) does not represent a violation. This does not affect the correct solution to the Practice Problem. o In the 4th line of Solution 20 (p. 167), Answer C is not consistent with the Standards (instead of also consistent). Reading 5: In the equation near the top of p. 291, the numerator should be PV (instead of FPV). Reading 7: In the Solutions to 2.A and 2.B (p. 389), replace (sigma) with s. Reading 8: Entries in Table 8 (p. 462) are in units of percent squared (%2). The terms 38%2 and 400%2 are 0.0038 and 0.0400, respectively, stated as decimals; correctly working in percents and decimals leads to identical answers. Reading 11: In footnote 26 (bottom of p. 613), the expression on the right should be divided by the square root of n (sample size): sd =
2 2 sA + sB 2r ( X A , X B ) sA sB / n .

Reading 12: In the first three lines at the top of p. 685 and again in the last sentence on the page, the terms %D and %K were reversed. Change D to K (lines 1 and 2) and change K to D (lines 1 and 3). Exhibit 28 is correct as shown. At the top of p. 697, the final number in the Elliott wave should be 13/8 = 1.6250 (instead of 8/13). In practice problem 10 (p. 704) and its solution (p. 708), the title of Exhibit 1 should state Price Measured in RMB 10 instead of RMB 100.

Volume 3 Reading 32: In practice problem 12 (p. 191), option A should be 125,000 (instead of 105,000). In the solution to 12 (p. 193), currency should be shown in instead of $. Study Session 8, Reading 34: There are a number of clarifications for this reading: o In Exhibit 5 (p. 263), the Cash and cash equivalents at beginning of year for 2005 should be 5,199 (instead of 5,119).

o In the illustration of Acme Corporation in the middle of p. 270, immediately above Example 5, there should be parentheses around (23) and (22). o In the calculation for FCFE (middle of p. 288), delete Net debt repayment. When net borrowing is negative, debt repayments exceed receipts of borrowed funds. Reading 35: Note that the numbers in Exhibit 5A (p. 316) do not necessarily sum to the column totals because of rounding. Reading 36: In Exhibit 5 on p. 405, the two references to GBP should be kilograms. On the same page, in Problem 19, insert purchased before finished goods. Reading 37: In the first table on p. 425, Year 3 ending net book value should be 287 (instead of 277). Year 4 beginning value should be 287 and depreciation expense is 187. In the second table (same page), Year 3 and Year 4 beginning net book value should be 800 and 450, respectively. Reading 38: In the middle of p. 479, change liability to equity account: In 2006, revaluation of the building gave rise to a balance sheet liability equity account, namely Revaluation Surplus Reading 39: Column headings are incorrect in the table on page 508. Interest expense should be at 4% (instead of 6%) and Amortisation is of the Premium (instead of Discount). In the last column of Exhibit 2 (p. 537), the last two entries should state that the interest portion of lease payments received is an operating cash inflow under U.S. GAAP (instead of outflow). Reading 43: In the LIFO to FIFO Adjustment column of Exhibit 4 (p. 653), delete the parentheses from the 16.8 adjustment for Net Income.

Volume 4 Reading 45: In the formula solution to Example 4 (p. 48), insert a superscript t beside the (1 + i) denominator beside the summation. In question #1 on p. 69, debt-to-equity should be debt-to-capital. The solutions are correct as shown in Table 5. On page 82, insert of equity in problem 20: The average asset beta weighted by market value of equity is closest to: Reading 47: In the third line of the solution to Example 6 (p. 142), net income should be 100 million (instead of 240 million). The remaining calculations are correct as shown. Reading 48: In the second line of the calculation for commercial paper cost (top of p. 206), the multiplication should be 12 instead of 1/12. Reading 49: In Reading 49, the equations properly reflect the preference for using average total assets and average shareholders equity. However, since information was not provided to get averages for the year 2003 for Office Depot or for Staples, the author elected to use year-end numbers for more consistent comparison. Reading 52: In Example 11, the curve representing the combination of Assets A and B was drawn incorrectly in Exhibits 26 to 29. The actual curve would be similar to that shown in Exhibit 25 (p. 370). Reading 53: There are a number of edits to this reading: o On p. 404, the intercept for the second equation should be Rb (subscript b) instead of Rf. o Edit the last sentence of the paragraph below Exhibit 9 (p. 427), as follows: which indicates that ZY has done a better job of generating excess return relative to systematic total risk than YZ because ZY has diversified away more of the nonsystematic risk than YZ.

o On p. 447, in the solutions to 19 and 20, the denominator should be 15% instead of 10%. In solution 19, the numbers 1.60, 1.50, and 1.40 should be 1.07, 1.00, and 0.93 respectively. In solution 20, the numbers 1.40, 1.50, and 1.60 should be 0.93, 1.00, and 1.07 respectively. The final solutions (C for 19, B for 20) are not affected. Volume 5 Reading 58: In footnote 19 (p. 178), delete it is referred to through the end of the footnote.