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# Errors Found in Study Materials P1.T3. Financial Markets & Products

#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
Subscriber
Hi @Elizabeth_Babalola Thank you, I hope you are keeping safe also! Can I clarify: do you mean that, in the denominator of the formula, instead of 1+Rf(T2 - T1), it should read 1+(Rf(T2 - T1))? And/or do you mean, in the equivalent calculation that, instead of (1+ 4.5 × 025), it should read (1+ (4.5 × 025))? If so, it's actually not necessary per order of operations (https://en.wikipedia.org/wiki/Order_of_operations) where multiplication is performed before addition. I do realize the calculator sets either way, but in mathematical expression, we (aka, everybody and commonly) rely on order of operations. Further, I think it's okay to expect the reader to understand that the discounting is with quarterly frequency is what's happening here; i.e., 1 + Rf*0.25 = (1 + Rf/k)^(T*k) in the case of k = 4 when T - 0.25 --> (1 + Rf/4)^(025*4) = (1 + Rf/4)^1 = (1 + Rf * 0.25). We should understand this is not annual compounding/discounting but rather discounting with quarterly compound frequency, if you like. If I misunderstood the correct requested, apologies?

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#### Elizabeth_Babalola

##### Member
Subscriber
I am well too. I guess i didn't meet the expectation . i literally spent a while punching my calculator. It could be that i lost touch.

Sadly, it's been a while i read. @David Harper CFA FRM, thanks for clarifying.

#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
Subscriber
No worries! It would not be wrong to add the parens, but if we had to do that in every instance (to reinforce the order of ops), we'd have to redo a lot of formulas! Talk to you soon!

#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
Subscriber
Hi @Elizabeth_Babalola My apologies, but that is a mistake. (Thank you!). It should be that either:
• Solution given (follows text) is: 0.98*exp[(0.070 - 0.050)*2) = 1.020; or
• Question setup (follows solutions) is: "Suppose that the 2-year interest rates in Australia and the United States are 3% and 1%, respectively, and the spot exchange rate is 0.9800 USD per AUD."