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2016 CFA Program: Level II Errata

31 August 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 ( to have
potential errata investigated. The eBook for the 2016 curriculum is formatted for continuous flow, so the text will
fit all screen sizes. Therefore, eBook page numberingwhich 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
There are a variety ways of quoting foreign exchange rates: $ to or per = $/ = : $. The quote :$ is
equivalent to a quote of $/. Authors use the two different methods of quoting currency exchange rates to ensure
readers develop familiarity with both.
Volume 1
Reading 2: In Exhibit 3, p. 172 of print, delete Level III CFA Candidate from the Improper References
Reading 14: In the first paragraph of Example 9 (p. 636 of print), the per capita GDP of Ireland was below the
per capita GDP of the United Kingdom (instead of per capita income of the UK).
Volume 2
Reading 20: In the table that begins Section 3.4 (p. 248 of print), Sales should be 9,000,000 (instead of
900,000) for both methods. Correct numbers are used in the ratios.
Reading 21: In the third paragraph of Section 5.1 (p. 339 of print), the final sentence should read or debt
repaymentsall of which are financing cash flows (instead of investing cash flows).
Volume 3

Volume 4
Reading 33: In Exhibit 4 (p. 151 of print), the Year-over-Year % for Other Expense should be negative
Reading 34: There are a number of corrections in this reading:
o Section 5.3 The H-Model (p. 262 and 263 of print) should have used 9 percent and 5 percent from
Example 13 for Carl Zeiss Meditec instead of using 15 percent and 8 percent. Thus, the calculations
immediately above Example 16 should appear as follows:

D0 1 g L D0 H g S g L
r gL

0.401.05 0.4050.09 0.05

0.071 0.05
0.42 0.08


and the analysts estimate of value using the H-model would have been 23.81 rather than 28.26 as in
Example 13.

In Solution to 2 of Example 18 (p. 267 of print), when substituting values into the equation for the Hmodel, the second expression should show 0.9436 in the numerator instead of 0.9463. Solution to 4 of
this example (p. 268 of print) should say Because the current price of $56.18 is between instead of
Reading 34: There are a number of corrections in this reading:
o In the calculation of present values at the bottom of Example 16 (p. 336 of print) the denominator under
54.55 should be to the power 3 instead of 4. The final solution is not affected.
o The second paragraph below Exhibit 16 (p. 338 of print) should begin: After 2017, FCFE will grow
(instead of 2016).
Reading 36: There are a number of corrections in this reading:
o In Example 3, Solution to 2 (p. 389 of print), the trailing EPS would be $6.01 (instead of $4.59).
o In Example 4 (p. 391 of print), the last row of Exhibit 1 (ROE) should read: 24.7%, 21.5%, 21.4%,
18.1%, 28.2%, 21.8%, and 22.4%.
o In the first paragraph of text under Exhibit 11 (p. 423 of print), the P/B should be 0.49 instead of 0.52. In
the second paragraph, the P/B based on tangible book value per share is 0.56 (= 2.4239/4.3636).

Volume 5
Reading 44: There are a number of revisions in this reading:
o In the paragraph immediately above Exhibit 18 (p. 294 of print), tree values were miscalculated for Time
1. Numbers in the exhibit are correct, but the paragraph should read: Coming back to Time 1, the tree
values are (0.5)(0.9245)/1.04646 + (0.5)(0.9429)/1.04646 = 0.8923 and (0.5)(0.9429)/1.03442 +
(0.5)(0.9571)/1.03442 = 0.9184. Finally, coming back to the beginning of Time 0, we find
(0.5)(0.8923)/1.02 + (0.5)(0.9184)/1.02 = 0.8876.
o The information in Exhibits 3 and 4 for Practice Problems 16 (pps. 304-305 of print) may be placed into
a tree similar to the exhibits within the reading. The node labels indicate placement in the tree.
Reading 45: In Example 7, Solution to 2 (p. 353 of print), the number in the numerator should be 100.924
(instead of 100.294). In the solution to Practice Problem 5 (p. 383 of print), the final value should be 103.744
(instead of 103.774).
Reading 46: There are a number of revisions in this reading:
o In the paragraph immediately below the Solution table for Example 1 (p. 392 of print), change the third
and fourth sentences to read as follows: By measures of expected loss, Green Company ranks as less
risky than Sleepy Company. Given the higher probability of default for Green Company than Sleepy
Company, Green Companys loss given default must be smaller than it is for Sleepy Company.
o In the second paragraph above Section 5.1 (p. 408 of print), in the discussion of the sixth assumption, the
notation should use the Greek iota (Xt) instead of the letter t.
Volume 6