CFA Level 1 Formulas 2024
when given D/E ratio how do you find the weight of debt? – answer D/E ratio / (1 + D/E
ratio)..... so 50% D/E ratio is 50% / (1+50%, so weight of debt is 33.3%
duration formula - answer change in price in % or basis points/change in rate in % or
basis point
what is the equation for degree of operating leverage? - answer (revenue - variance
operating costs) / (revenues - variable operating costs - fixed operating costs).... same
way of saying (% change in EBIT / % change in sales)
what is the equation for net profit margin if you are given asset numbers? – answer
ROA / Asset turnover
what is the equation for financial leverage of you are given return numbers? – answer
ROE/ROA
if you are given asset beta aka unlevered beta, how do you calculate equity beta? -
answerasset beta x [1 + ((1-tax rate) x D/E)]
how do you calculate ending retained earnings? - answerBeginning retained earnings +
Net income - Dividends
what does Leptokurtotic mean? - answerdistribution that is more peaked than normal
what does Platykurtotic mean? - answerdistribution that is flatter than normal
what does Mesokurtotic mean? - answerdistribution that is perfectly normal
what is a positively skewed distribution? - answerdistribution is skewed to the right,
which is attractive for investors because the mean return is above the median
what is covariance between two funds if you are given the standard deviation of returns
and the correlation between the two funds? - answercorrelation coefficient x standard
deviation of fund A x standard deviation of fund B
how do you calculate the standard deviation of the portfolio if you are given the standard
deviation of each fund, the correlation, as well as the weight? - answer((weight of fund 1
x standard deviation of fund 1) + (weight of fund 2 x standard deviation of fund 2) + (2 x
covariance between two funds))^0.5
, how do you calculate the odds of something happening if you have the probability? -
answerprobability / (1 - probability)
what is equation for duration gap? - answermacaulay duration - investment horizon
what is the equation for effective duration? - answer(price of up move - price of down
move) / (2 x change in interest rate x price of bond now)
what is the equation for GDP using the expenditures approach? - answerC + I + G + X -
M
what is the equation for degree of total leverage? - answerContribution margin /
(contribution margin - fixed costs - financing costs)
what is the equation for current ratio? - answer(cash + marketable securities +
receivables + inventory) / current liabilities
what is the equation for cash ratio? - answer(cash + marketable securities) / current
liabilities
what is the equation for quick ratio? - answer(cash + marketable securities +
receivables) / current liabilities
what is the equation for the price target if you are given head price, shoulder price and
neckline price? - answerneckline - (head - neckline).... neckline is also known as
support level
what is the equation for standard error of the sample mean? - answerstandard deviation
/ square root of sample size
when do you reject the null hypothesis? - answerwhen the p-value is less than the level
of significance
what is the equation for the sharpe ratio? - answer(expected return - risk free rate) /
standard deviation of returns
how do you calculate the beta of a stock if you are given its correlation with the market,
and the standard deviation of the market and the stock? - answer(correlation x standard
deviation of stock x standard deviation of market) / (2 x standard deviation of the
market)
what is the equation for a permutation? what is its most important characteristic? -
answern! / (n-r)!.... order matters!
what is the equation for a combination? what is its most important characteristic? -
answern! / (n-r)! r!.... order doesn't matter!
when given D/E ratio how do you find the weight of debt? – answer D/E ratio / (1 + D/E
ratio)..... so 50% D/E ratio is 50% / (1+50%, so weight of debt is 33.3%
duration formula - answer change in price in % or basis points/change in rate in % or
basis point
what is the equation for degree of operating leverage? - answer (revenue - variance
operating costs) / (revenues - variable operating costs - fixed operating costs).... same
way of saying (% change in EBIT / % change in sales)
what is the equation for net profit margin if you are given asset numbers? – answer
ROA / Asset turnover
what is the equation for financial leverage of you are given return numbers? – answer
ROE/ROA
if you are given asset beta aka unlevered beta, how do you calculate equity beta? -
answerasset beta x [1 + ((1-tax rate) x D/E)]
how do you calculate ending retained earnings? - answerBeginning retained earnings +
Net income - Dividends
what does Leptokurtotic mean? - answerdistribution that is more peaked than normal
what does Platykurtotic mean? - answerdistribution that is flatter than normal
what does Mesokurtotic mean? - answerdistribution that is perfectly normal
what is a positively skewed distribution? - answerdistribution is skewed to the right,
which is attractive for investors because the mean return is above the median
what is covariance between two funds if you are given the standard deviation of returns
and the correlation between the two funds? - answercorrelation coefficient x standard
deviation of fund A x standard deviation of fund B
how do you calculate the standard deviation of the portfolio if you are given the standard
deviation of each fund, the correlation, as well as the weight? - answer((weight of fund 1
x standard deviation of fund 1) + (weight of fund 2 x standard deviation of fund 2) + (2 x
covariance between two funds))^0.5
, how do you calculate the odds of something happening if you have the probability? -
answerprobability / (1 - probability)
what is equation for duration gap? - answermacaulay duration - investment horizon
what is the equation for effective duration? - answer(price of up move - price of down
move) / (2 x change in interest rate x price of bond now)
what is the equation for GDP using the expenditures approach? - answerC + I + G + X -
M
what is the equation for degree of total leverage? - answerContribution margin /
(contribution margin - fixed costs - financing costs)
what is the equation for current ratio? - answer(cash + marketable securities +
receivables + inventory) / current liabilities
what is the equation for cash ratio? - answer(cash + marketable securities) / current
liabilities
what is the equation for quick ratio? - answer(cash + marketable securities +
receivables) / current liabilities
what is the equation for the price target if you are given head price, shoulder price and
neckline price? - answerneckline - (head - neckline).... neckline is also known as
support level
what is the equation for standard error of the sample mean? - answerstandard deviation
/ square root of sample size
when do you reject the null hypothesis? - answerwhen the p-value is less than the level
of significance
what is the equation for the sharpe ratio? - answer(expected return - risk free rate) /
standard deviation of returns
how do you calculate the beta of a stock if you are given its correlation with the market,
and the standard deviation of the market and the stock? - answer(correlation x standard
deviation of stock x standard deviation of market) / (2 x standard deviation of the
market)
what is the equation for a permutation? what is its most important characteristic? -
answern! / (n-r)!.... order matters!
what is the equation for a combination? what is its most important characteristic? -
answern! / (n-r)! r!.... order doesn't matter!
