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CFA Level 1 Formulas
Comprehensive
Questions (Frequently
Tested) with Verified
Answers Graded A+
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1. Price change based on convexity Answer: -duration(change in yield)+1/2(convexity)
(change in yield)^2
2. Effective Duration Answer: Required if a bond has embedded options Answer:
[(v-)-(v+)]/[2V0(change in curve)]
3. Modified Duration Answer: [(v-)-(v+)]/[2V0(change in yield)]
4. Future Value Answer: PV(1+(I/Y)^N)
5. PV Answer: FV/(1+r)^n
6. PV of perpetuity Answer: PMT / discount rate
7. Approximate percentage price change of a bond Answer: (-)(modified duration)
(ΔYTM)
8. Nominal Risk Free Answer: Real Risk Free + expected inflation
9. Required Return Answer: Nominal risk free + liquidity premiums + default risk premium +
maturity risk premium
10. EAR Answer: [(1+periodic rate)^N ] - 1
11. EAR continuous Answer: e^r - 1
12. Bank discount yield Answer: (FV - Price)/(FV) * (360/T)
13. HPY Answer: [(P1+D1)/P0] - 1
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14. EAY Answer: (1+HPY)^(365/T) - 1
15. HPY (MMY equation) Answer: MMY * (T/360)
16. MMY Answer: HPY * (360/T)
17. Geometric return Answer: [(1+r1)(1+r2)(1+r3)]^(1/n) - 1
18. Time weighted return Answer: [(1+HPY1)(1+HPY2)(1+HPY3)]^(1/n) - 1
19. Harmonic Mean Answer: [N/(sum of (1/sample means))]
20. Position of observation Answer: (n+1)*(k/100)
21. Excess kurtosis Answer: Sample kurtosis - 3 (3 is normal kurtosis)
22. Mean absolute deviation Answer: sum of Answer: (mean - sample mean)/n-1
23. Variance Answer: (x-mean)^2/N (population) and divided by (n-1) for a sample
24. Coefficient of Variation Answer: Sample standard deviation/sample mean
25. Sharpe Ratio Answer: Risk of portfolio - risk free / Standard deviation of portfolio
26. Joint Probability Answer: P(AB) = P(A|B) * P(B)
27. Addition rule Answer: P(A or B) = P(A) + P(B) - P(AB)
28. Multiplication rule Answer: P(A and B) = P(A)*P(B)
29. Total Probability Rule Answer: P(A) = P(A|B1)*P(B1)...+P(A|B2)*P(B2)
30. Expected Value Answer: P(x)*(x)
31. Covariance Answer: P[(Ra - E(Ra) * (Rb - E(Rb)] - sum for all probabilities that sum to 1 OR
CFA Level 1 Formulas
Comprehensive
Questions (Frequently
Tested) with Verified
Answers Graded A+
, Contact for further consultation
1. Price change based on convexity Answer: -duration(change in yield)+1/2(convexity)
(change in yield)^2
2. Effective Duration Answer: Required if a bond has embedded options Answer:
[(v-)-(v+)]/[2V0(change in curve)]
3. Modified Duration Answer: [(v-)-(v+)]/[2V0(change in yield)]
4. Future Value Answer: PV(1+(I/Y)^N)
5. PV Answer: FV/(1+r)^n
6. PV of perpetuity Answer: PMT / discount rate
7. Approximate percentage price change of a bond Answer: (-)(modified duration)
(ΔYTM)
8. Nominal Risk Free Answer: Real Risk Free + expected inflation
9. Required Return Answer: Nominal risk free + liquidity premiums + default risk premium +
maturity risk premium
10. EAR Answer: [(1+periodic rate)^N ] - 1
11. EAR continuous Answer: e^r - 1
12. Bank discount yield Answer: (FV - Price)/(FV) * (360/T)
13. HPY Answer: [(P1+D1)/P0] - 1
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14. EAY Answer: (1+HPY)^(365/T) - 1
15. HPY (MMY equation) Answer: MMY * (T/360)
16. MMY Answer: HPY * (360/T)
17. Geometric return Answer: [(1+r1)(1+r2)(1+r3)]^(1/n) - 1
18. Time weighted return Answer: [(1+HPY1)(1+HPY2)(1+HPY3)]^(1/n) - 1
19. Harmonic Mean Answer: [N/(sum of (1/sample means))]
20. Position of observation Answer: (n+1)*(k/100)
21. Excess kurtosis Answer: Sample kurtosis - 3 (3 is normal kurtosis)
22. Mean absolute deviation Answer: sum of Answer: (mean - sample mean)/n-1
23. Variance Answer: (x-mean)^2/N (population) and divided by (n-1) for a sample
24. Coefficient of Variation Answer: Sample standard deviation/sample mean
25. Sharpe Ratio Answer: Risk of portfolio - risk free / Standard deviation of portfolio
26. Joint Probability Answer: P(AB) = P(A|B) * P(B)
27. Addition rule Answer: P(A or B) = P(A) + P(B) - P(AB)
28. Multiplication rule Answer: P(A and B) = P(A)*P(B)
29. Total Probability Rule Answer: P(A) = P(A|B1)*P(B1)...+P(A|B2)*P(B2)
30. Expected Value Answer: P(x)*(x)
31. Covariance Answer: P[(Ra - E(Ra) * (Rb - E(Rb)] - sum for all probabilities that sum to 1 OR
