Exam+FM+ +Errata+List+for+9th+Edition

8/13/2019 Exam+FM+ +Errata+List+for+9th+Edition

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Errata for 9 th Edition of Exam FM/2 Manual(Last updated 8/7/13)

[8/7/13 !ote on "han#es in Learnin# $%&e"ti'es for $"to%er 2 13

Starting with the October 2013 exam, some topics were removed and some were added tothe list of Learning Objectives. owever, there were no changes in the !ext "eferences.#$or example, altho%gh the topic of &investment 'ear allocation methods( was removed,the !ext "eferences still cover this topic.) *e emailed the $+ 2 exam committee inearl' -%l' 2013 to tr' to clarif' this sit%ation, b%t we have not heard bac from them./nless we receive information to the contrar', the a%thors of S+ s xam $+ 2 man%als%ggest that 'o% contin%e to learn certain topics that are no longer specificall' listed onthe Learning Objectives. *e have noted what these topics are in the %pdates below dated

4 13. #Other topics that were added to the Learning Objectives are alread' covered b'the man%al or b' the %pdates below.)

[7/17/11 *mportant note on immuni+ation, -tudents ha'e reported thatthere ha'e %een a surprisin# num%er of .uestions on immuni+ation

(in"ludin# the topi"s of duration and "on'exit ) on re"ent exams0 he pra"ti"e exams in this manual "ontain 'er 'er fe4 .uestions on

these topi"s0 5e su##est that ou thorou#hl re'ie4 -e"tions 9" to 9n %efore ou ta6e the exam0

56 21 137 8age 21, 9. 6. nswer choice #:) sho%ld be 1;1;.

5; 2 107 8age 21, 9. 4. !his problem sho%ld act%all' appear at the end of Sections 1a#vi) to 1a#ix).

56 21 137 8age 2 i) 2n.

56 21 137 8age 34, sol%tion to 9. i 2)2 ? 1,@ 0, we have #1 > i 2)10 ? 1.@ 10 2 , A ? 1000#1 > i 2) 10 ? 1000#1.@ 10 2 ) ? 1,24


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56 21 137 8age 2, diagram in the middle of the page. 3H applies to a period of I of a 'ear. #!he arrowsma e it appear as if 3H applies to I of a period, which is J of a 'ear.)

54 14 117 8age 113, sol%tion to 9. 4, 2 nd line. " ? 160. 0 #based on the n%mber of decimal places %sed),not 160.0 . !he sol%tion is based on the correct val%e.

5 13 107 8age 12@, sol%tions to 9. 4. On the last line, the denominator sho%ld be 1 D .461316. !he answeris based on the correct denominator.

51 22 107 8age 130, sol%tion to 9. 1 , first line. On the rightDhand side of the eF%ation, the term of theann%it' sho%ld be 20, not 10. !he correct term is %sed in the sol%tion.

51 22 107 8age 203, items #2)#b) and #2)#c). !here sho%ld be a 9 in front of the second term of the G.

5 13 107 8age 216, sol%tion to 9. 11. !he wa' the F%estion is worded, the correct answer is # ), not #:). s noted in the sol%tion, the acco%nt balance at the end of the th 'ear is K;


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modified convexit'. 51 22 107 8age ;


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#EG) are with respect to the underlying asset.

51 22 107 8age 633, first table. En the first col%mn, the position shown in parentheses is with respect to the underlying asset.

51 22 107 8age 63;, Section 1;e, 3 rd, ; th and 6 th paragraphs. "eplace these paragraphs b' the followingthree paragraphsB

&S%ppose we have a short position in an asset #for example, we sell the asset short). *e wo%ldlose mone' if the price of the asset increases. Ef we b%' a call, it s ins%rance against price

increases, since the pa'off %nder the long call increases as the price of the %nderl'ing asset increases. !h%s, we can sa' that the strateg' behind a long call #when we have a short position

in the %nderl'ing asset) is ins%rance against a high price.(

& written call is li e selling ins%rance against a high price.(

& s we saw in Section 13c, a long p%t is ins%rance against a decrease in the price of the %nderl'ing asset. !h%s, we can sa' that the strateg' behind a long p%t #when we have a long position in the %nderl'ing asset, s%ch as when we own it) is ins%rance against a low price.(

5; 23 0@7 8age 636, footnote #a) %nder the table at the top. Sho%ld sa' &as discussed in Section 13a (, not &as j%st disc%ssed(.

51 22 107 8age 634, first b%llet #!axes), ; th line. Pelete &spot price at the time of exercise( and replace b'&stri e price(.

51 22 107 8age 6;4, 1st paragraph. dd the following sentence to the end of the paragraphB &*e will ass%me that the %nderl'ing asset does not pa' dividends. ; th paragraph, 2 nd line. "eplace

&Section 1;d( b' &Section 13a(.

51 22 107 8age 66@. -%st before 9.1, insert the statementB & ss%me that an' stoc s in the followingF%estions do not pa' dividends.(

5; 23 0@7 8age 6


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51 22 107 8age 64@, sol%tion to 9. 1. "eplace the sol%tion b' the followingB

!he combination of a long call and a short p%t with a stri e price of R creates a s'nthetic forward with a forward price of R. !he premi%m for this offDmar et forward is eF%al to the

net premi%m for the long call and short p%t. !h%s in this problem we haveB

32.@ A ? 1 .1 A ? 1;. 0

51 22 107 8age 64@, sol%tion to 9. ;. En the note to the sol%tion, delete &borrowing mone' #with no mar etris involved and repa'ing( and replace b' &lending mone' at the ris Dfree interest rate andreceiving a pa'ment of(.

51 22 107 8age 6


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51 22 107 8age < 0, sol%tion to 9. 2@. On the 3rd line, a division bar was omitted from the 2 nd term on theleftDhand side of the eF%ation, which sho%ld readB 61.21 #1 > x)2. On the ; th line, the factor#1.0@) sho%ld be #1.2@). !he res%lt for 1 > x is correct.

54 14 117 8age < 1, sol%tion to 9. 3;, 3 rd eF%ation. !he n%mber in the angleDbrac et sho%ld be 2 2 #? 3

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Exam+FM+ +Errata+List+for+9th+Edition