Is anyone else finding an unusually high number of errors throughout the Schweser study books? I suspect the mistakes in the level II books are much higher than level I. For example, Book 3 (COrp. Fin) pg. 25, question #25. The answer does not back out the risk free rate from the CAPM equation. Sometimes they write “increase” when in fact they mean “decrease.” I’m starting to question my go-to study guide, and was wondering if you had the same suspicions? Thanks. Steven

Steven, I don’t have the LI books but the page you referenced isn’t among the reported errata. http://www.schweser.com/news/notes_updates.php?type=schweser Is the market return described as “expected excess return” or something similar that implies the risk-free rate is already subtracted from the market return? Similarly, I suggest making revisions to your CFAI volumes based on the items listed at: http://cfainstitute.org/cfaprog/resources/pdf/L1_Errata.pdf Check these sites occasionally for updates, particularly when you suspect a mistake. You can submit potential errata to both Schweser and CFAI.

Thanks for the tip and link. I meant page 52, not 25 from above (shows what a late night will do and when you think the answer is incorrect!) Here is the question: “Company analyzing 2 projects. Proj A has a project beta of 1.2 and Proj. B has a project beta of 0.6. The Company’s WACC is 10%. The risk-free rate is 5% and the market risk premium is 10%. If the company incorrectly uses the Company’s WACC to calculate the NPV of both projects, will it overestimate or underestimate the NPV of:” ProjA: Proj B A) Underestimate Underestimate B) Overestimate Underestimate C) Underestimate Overestimate D) Overestimate Overestimate Apply CAPM and I get a disc rate of .11 for project A and .08 for project B - implying that A would be overstated and B Understated which means answer B is correct. Schweser has D as the correct answer using the following formula for CAPM: 5% + 1.2(10%) = 17%…which is incorrect…I think…any thoughts?

that is correct. it says market risk premium which is rm-rf, by definition. cp

Suggest you have more confidence in Schweser…

Totally agree, the Schweser study notes have a lot of mistakes. It looks like they have never passed a proofreading Shame on Schweser!

stevenlepine Wrote: ------------------------------------------------------- > Thanks for the tip and link. I meant page 52, not > 25 from above (shows what a late night will do and > when you think the answer is incorrect!) Here is > the question: > > “Company analyzing 2 projects. Proj A has a > project beta of 1.2 and Proj. B has a project beta > of 0.6. The Company’s WACC is 10%. The risk-free > rate is 5% and the market risk premium is 10%. If > the company incorrectly uses the Company’s WACC to > calculate the NPV of both projects, will it > overestimate or underestimate the NPV of:” > > ProjA: Proj B > A) Underestimate Underestimate > B) Overestimate Underestimate > C) Underestimate Overestimate > D) Overestimate Overestimate > > Apply CAPM and I get a disc rate of .11 for > project A and .08 for project B - implying that A > would be overstated and B Understated which means > answer B is correct. Schweser has D as the > correct answer using the following formula for > CAPM: > > 5% + 1.2(10%) = 17%…which is incorrect…I > think…any thoughts? The answer given by Schweser is correct… Re=Rf+beta(Rm-Rf)=0.05+1.2(0.1) which gives u 0.17, and like what cpk said, market risk premium=Rm-Rf

Hmm, when I looked up the errors in the study notes I thought there really wasn’t that many - after all, the 5 Schweser books is a lot of information…I was expecting more errors, to be honest. I do find on Q bank that there is sometimes a missing minus or negative sign here and there - but usually you know that it belongs there just from being familiar with the material from the readings(in formulas and such)…But then, I don’t have the online Q bank, but the CD version - so maybe online it does not have this problem. Or maybe my mind is just going from staring at Q bank too long!