Typos - Financial Theory and Corporate Policy - 4th edition -

Copeland, Weston and Shastri.

Mia Holmfeldt∗

September 19, 2006

∗ Ph.D Student, Lund University, Department of Economics, P.O. Box 7082, S-220 07 Lund, Sweden, Tel. +46

(0)46 222 86 55 , Fax. +46 (0)46 222 41 18, E-mail: mia.holmfeldt@nek.lu.se

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 Chapter 3 1. On the 4th row in the last section on p. 47, ”The second gamble is a 50/50 chance of
winning y or z (right shoe or right shoe)” Not winning x or z!
2. Last section on p. 49. Referring to Eq. 3.1 should instead be referring to Eq 3.2!
3. The subtitle in Table 3.1 column 3 on p. 51 should be Probability of Gain (not profitabil-
ity)

Chapter 4 1. Figure 4.3 on p. 87, the slope of the budget line should be − $1
pt . Otherwise the axes of
Qt and C has to be changed.
2. Problem 4.1 in the problem set should instead be, ”...Security B pays $20 if state 1 occurs
and $40 (Not $0 as is) if state 2 occurs”

Chapter 6 1. In Eq. 6.14 there is an wi missing between the two summation signs. The equations
should be
N
X N
X N
X
2
σ (Rp ) = wi wj σij = wi COV (Ri , Rj )
i=1 i=1 i=1

2. In the problem set, exercise 6.16, the beta of asset i = 3 should be β3 = 1.2 (not 1.3 as
is now). It is needed in order to solve for rf and E[rM ].

Chapter 7 1. Appendix 7A. p. 255

The stock price process should include an S in the last part of the equation, dS =
µSdt + σSdz.
2. First row on p. 220. ”Referring to figure 7.11”. (Not 7.9)
3. First equation on p. 220 is missing an S in the first term on the right hand side of the
equal sign. The formula should be, (1 + rf )S = quS + (1 − q)dS, in order to yield the
following result, q = ((1 + rf ) − d)(u − d)−1 .
4. Second row on p. 233. ”Using Eq. 7.35”. (Not 7.31)
5. Third equation on p. 233, is missing an equal sign. The equation should be cu =
[pcuu + (1 − p)cud ]/(1 + rf ).

Appendix D 1. Error in the exponent in the first equation in the equation array on p. 934. The correct
equation should be, ln[erc n ] = ln(1 + rd )n . The exponent in the book is d instead of n.
2. Nr. 8 in the Rules of differentiation should be,

f (X) = eg(X) , f 0 (X) = g 0 (X)eg(X)