V1 Module 2 Errata: Types of Financial Returns

1. Financial Instruments Are Incorrectly Defined as Universally Standardized

Curriculum location: Types of Returns for Financial Assets, Instruments, and Indicators, Types of Returns: Financial Instruments, printed p. 52.

"Financial instruments are standardized legal agreements for financial assets, such as equity and bonds, as well as derivatives and securitized debt. The standardization facilitates public trading among investors."

The statement makes standardization part of the definition of every financial instrument. That is too broad: over-the-counter instruments can be customized, while exchange-traded instruments are generally standardized.

Correct reading: Financial instruments are legal agreements involving financial assets. Standardized instruments can facilitate public trading, but standardization is not universal.

Candidates otherwise risk treating customized OTC instruments as impossible.

2. Two Direct Exchange-Rate Quotes Use the Reciprocal Currency-Pair Label

Curriculum location: Types of Returns for Financial Assets, Instruments, and Indicators, Impact of Exchange Rates When Investing in the Ørsted A/S EUR750 Million Bond, printed p. 54.

"At this time, the USD/EUR exchange rate was 1.2216, meaning EUR1 was worth USD1.2216."

Curriculum location: Types of Returns for Financial Assets, Instruments, and Indicators, the same case study, printed p. 54.

"By the end of 2021, these bonds were trading at EUR107.769 per EUR100 face value, and the USD/EUR exchange rate had moved to 1.1373; that is, USD1 could be exchanged for EUR0.8793."

Both quoted rates state US dollars per euro, so the direct pair is EUR/USD. Exhibit 3 correctly uses the reciprocals 0.8186 and 0.8793 as USD/EUR.

Correct reading: Label 1.2216 and 1.1373 as EUR/USD. Keep the reciprocal quotes 0.8186 and 0.8793 labeled USD/EUR.

Candidates can otherwise invert the rate and reverse the base and price currencies.

3. The Rounded Currency Factor Does Not Reproduce the Displayed USD Return

Curriculum location: Types of Returns for Financial Assets, Instruments, and Indicators, Ørsted bond case, overall USD-return calculation, printed p. 55.

$(1-0.0291)(1-0.0691)-1=-9.61\%$

The printed factors give $-9.618919\%$, which rounds to $-9.62\%$, not $-9.61\%$. The preceding line rounds the euro's currency return to $-6.90\%$.

Correct reading: With the displayed rounded inputs, use $(1-0.0291)(1-0.0690)-1=-9.60921\%\approx-9.61\%$.

Candidates otherwise cannot reproduce the displayed answer from the displayed inputs.

4. The Corporate-versus-Government Bond Return Direction Is Reversed

Curriculum location: Types of Returns for Financial Assets, Instruments, and Indicators, Historical Long-Term Asset Returns, printed p. 59.

"Differences between corporate and government bond indexes suggest that corporate bonds generate slightly higher aggregate returns than government bonds."

Exhibit 8 on the same page reports geometric mean total returns of 7.43% for US corporate bonds and 7.62% for US Treasury bonds. The next page also says corporate bonds underperformed government bonds.

Correct reading: Over the displayed 1979–2023 period, government bonds generated slightly higher aggregate returns than corporate bonds.

Candidates can otherwise reverse which bond series outperformed in the curriculum's own data.

5. The Debt-Outperformance Equality Omits a Required Subtraction

Curriculum location: Types of Returns for Financial Assets, Instruments, and Indicators, Knowledge Check: Differences in Debt Returns, Question 1 solution, printed p. 61.

$\frac{1+7.62\%}{1+7.43\%}-1=\frac{1.0762}{1.0743}=0.18\%$

The ratio $\frac{1.0762}{1.0743}$ is approximately 1.0018, not 0.18%. The second expression also needs to subtract one.

Correct reading: $\frac{1+7.62\%}{1+7.43\%}-1=\frac{1.0762}{1.0743}-1\approx0.18\%$.

Candidates otherwise risk confusing a growth ratio with the relative return derived from it.

Complete Module 2 Body-Text Errata Index

Errata scope

• Curriculum: CFA Level I 2027 Curriculum
• Volume: Volume 1, Quantitative Methods
• Module: Module 2, Types of Financial Returns
• Topics covered: Types of Returns for Financial Assets, Instruments, and Indicators
• Source reviewed: The official 26-page Module 2 curriculum PDF, with teaching content on printed pp. 49–69

The table below lists every confirmed source-authored body-text error identified in the in-scope topic. Embedded Case Studies, Knowledge Checks, and the Question Set through printed p. 68 are included. Import-only defects and module-end Practice Problems on printed pp. 70–71 are excluded.

Page references use the printed curriculum page numbers.

References

• CFA Institute: Derivative Instrument and Derivative Market Features
• CFA Institute: Currency Exchange Rates

This article is an independent candidate-focused analysis of confirmed errors in the CFA Level I 2027 Curriculum, Volume 1 Quantitative Methods, Module 2 Types of Financial Returns. It is not an official curriculum errata notice.