MOck 2012 morning sesh- Q 23 & 24 - Portfolio Management

Hi guys,

Does anyone else feel there are errors in questions 23 & 24 of the 2012 Mock morning exam?

They ask for standard deviation, but then calculate only the variance in the answer (they do not square it to get the std dev).

Also, in Q24 they say the CAPM is R= 2% + 1.2 (12% -2%) is equal to 12%, when it is actually 14%.


Surprised nobody else has commented on this. I’m pretty sure the required return calculated with the CAPM would be 2 + 1.2 (12-2)= 14%. If the expected return (12%) is less than the required return (14%), the security is overvalued. Right?

I also agree on #24. It should be 14% and therefore overvalued. In the explantion they even calculate it correctly, but put the wrong number. Hopefully some more people chime in on this.

The CFA have picked up a mistake for q24 on their Errata…Go to the cfa site, log in and check.

Yes, it is corrected in errata now and on the actual exam ( I just printed off this exam on friday)

There is still an error, even in the errata!

In the assumptions, it states:

βi = beta of asset i, 1.1

The beta is 1.2

1.2 is plugged into the formula, however. Someone was asleep when they wrote the solution to this question.

This error really concerns me about the quality of CFAI … Shouldn’t they put another mistake on the exam day? Who will know?