CFA level II errata 0319

Change Log for CFA 2019 Level II
Date

Lesson and Content Identifier

Change

03/07/2019

SS4. Economics / R11. Curency Exchange Rates: Determination and
Forecasting / Lesson 1 / Study Text

This lesson covers LOS11a only. LOS11b is covered in Lesson 2.

02/21/2019

SS4. Economics / R11. Curency Exchange Rates: Determination and
Forecasting / Lesson 3 / Study Text

1.4 Triangular Arbitrage
Assume that we are provided with the following exchange rate quotes by a
European bank:
USD/EUR = 1.3802 - 1.3806
GBP/EUR = 0.8593 - 0.8599

02/21/2019

SS4. Economics / R13. Economics of Regulation / Lesson 1 / Study Text

1.2 Reasons for Decreased Reliance on Self-Regulation
First sentence under LOS13d should read:

“The regulatory capture theory argues that regulation can often actually advance
the interests of the regulated industry (e.g., by restricting potential competition
and coordinating the strategies of rivals).

01/29/2019

SS5. FRA (1) / R14. Intercorporate Investments / Lesson 3 / Study Text

3.5 Impairment, last bullet point should read as follows:
“Reversal of an impairment loss is not allowed under IFRS (except for nongoodwill impairment losses) or U.S. GAAP.”

03/04/2019

02/28/2019

SS10. Equity Valuation / R29. Discounted Dividend Valuation / Lesson 5
/ Study Text

Therefore, (in what is known as the PRAT model) SGR can be computed as:

SS14. Derivatives / R41. Derivative Strategies / Lesson 3 / Study Text

3. 1 Bull Spreads

g = Profit margin x Retention rate x Asset turnover x Financial leverage

The net premium paid is cL – cH = $5.48 – $0.51 = $4.97. The profit and loss
diagram for the bull spread is shown in Figure 3.1, and the corresponding
values using formulas are:
1. Maximum gain = XH – XL – Net premium = $55.00 – $45.00 – $4.97 = $5.03.

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2. Maximum loss = cL – cH, where neither of the calls is in-the-money, so the
loss is limited to the net premium paid = $4.97.
3. Breakeven point = Occurs in the region where the lower call is in-the-money.
The share price must rise enough above the lower exercise price to cover the
net premium = XL + (cL – cH) = $45.00 + $4.97 = $49.97.

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