AuthorTopic: Rounding Error?? - Hopefully
@2015-11-11 22:09:59
I recall a post a few months back about rounding differences that are possible between CFAI text questions and what you will get using a calculator. I believe CFAI even makes note of this in their literature somewhere.

HOWEVER, I am thinking I have missed something on the following problem b/c the rounding "error" seems to point to a wrong answer.

The problem is in Reading 59 in Derivatives ("Options Mrkts & Contracts") question number 11. The problem asks for the lower bound of a call option (American & Euro).

The text gives the result of 5.63 (in both cases). The calculation/equation that CFAI shows to get to that number is:
($70-$65)/(1.05) rasied to the 0.2 power. Using the HP12-C, I get 4.95, NOT 5.63.

This seems really far off for such a small number/answer. Am I missing something?
@2015-11-14 09:50:54
May be on the errata? Doesn't look like there's much they could round based on info above.

CFA Discussion Topic: Rounding Error?? - Hopefully

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Craig Baugh

Craig Baugh