CFA Level 1 Test Formulas || 100%
Accurate
EAY - ANSWER-(1+HPY)^(365/T) - 1
HPY (MMY equation) - ANSWER-MMY * (T/360)
MMY - ANSWER-HPY * (360/T)
Geometric return - ANSWER-[(1+r1)(1+r2)(1+r3)]^(1/n) - 1
Time weighted return - ANSWER-[(1+HPY1)(1+HPY2)(1+HPY3)]^(1/n) - 1
Harmonic Mean - ANSWER-[N/(sum of (1/sample means))]
Position of observation - ANSWER-(n+1)*(k/100)
Excess kurtosis - ANSWER-Sample kurtosis - 3 (3 is normal kurtosis)
Mean absolute deviation - ANSWER-sum of: (mean - sample mean)/n-1
Variance - ANSWER-(x-mean)^2/N (population) and divided by (n-1) for a sample
Coefficient of Variation - ANSWER-Sample standard deviation/sample mean
Sharpe Ratio - ANSWER-Risk of portfolio - risk free / Standard deviation of portfolio
Joint Probability - ANSWER-P(AB) = P(A|B) * P(B)
Price change based on convexity - ANSWER--duration(change in yield)+1/2(convexity)
(change in yield)^2
Effective Duration - ANSWER-Required if a bond has embedded options:
[(v-)-(v+)]/[2V0(change in curve)]
Modified Duration - ANSWER-[(v-)-(v+)]/[2V0(change in yield)]
Future Value - ANSWER-PV(1+(I/Y)^N)
PV - ANSWER-FV/(1+r)^n
PV of perpetuity - ANSWER-PMT / discount rate
, Approximate percentage price change of a bond - ANSWER-(-)(modified duration)
(ΔYTM)
Nominal Risk Free - ANSWER-Real Risk Free + expected inflation
Required Return - ANSWER-Nominal risk free + liquidity premiums + default risk
premium + maturity risk premium
EAR - ANSWER-[(1+periodic rate)^N ] - 1
EAR continuous - ANSWER-e^r - 1
Bank discount yield - ANSWER-(FV - Price)/(FV) * (360/T)
HPY - ANSWER-[(P1+D1)/P0] - 1
Addition rule - ANSWER-P(A or B) = P(A) + P(B) - P(AB)
Multiplication rule - ANSWER-P(A and B) = P(A)*P(B)
Total Probability Rule - ANSWER-P(A) = P(A|B1)*P(B1)...+P(A|B2)*P(B2)
Expected Value - ANSWER-P(x)*(x)
Covariance - ANSWER-P[(Ra - E(Ra) * (Rb - E(Rb)] - sum for all probabilities that sum
to 1 OR [SDa*SDb*correlation)
Correlation - ANSWER-Covariance(A,B) / SDa*SDb
Portfolio expected return - ANSWER-weight times the E(R) of each stock
Portfolio variance - ANSWER-Wa^2*SDa^2 + Wb^2*SDb^2 +
2WaWb*SDa*SDb*Corr(a,b)
Baye's formula - ANSWER-P(new info) / unconditional probability of new info*prior prob
of event
Economic profit - ANSWER-Total revenue - explicit costs - implicit costs(opportunity
costs)
Normal profit - ANSWER-Acctg profit - economic profit (equals 0)
Total revenue - ANSWER-Price * quantity
Avg total revenue - ANSWER-TR/Q
Accurate
EAY - ANSWER-(1+HPY)^(365/T) - 1
HPY (MMY equation) - ANSWER-MMY * (T/360)
MMY - ANSWER-HPY * (360/T)
Geometric return - ANSWER-[(1+r1)(1+r2)(1+r3)]^(1/n) - 1
Time weighted return - ANSWER-[(1+HPY1)(1+HPY2)(1+HPY3)]^(1/n) - 1
Harmonic Mean - ANSWER-[N/(sum of (1/sample means))]
Position of observation - ANSWER-(n+1)*(k/100)
Excess kurtosis - ANSWER-Sample kurtosis - 3 (3 is normal kurtosis)
Mean absolute deviation - ANSWER-sum of: (mean - sample mean)/n-1
Variance - ANSWER-(x-mean)^2/N (population) and divided by (n-1) for a sample
Coefficient of Variation - ANSWER-Sample standard deviation/sample mean
Sharpe Ratio - ANSWER-Risk of portfolio - risk free / Standard deviation of portfolio
Joint Probability - ANSWER-P(AB) = P(A|B) * P(B)
Price change based on convexity - ANSWER--duration(change in yield)+1/2(convexity)
(change in yield)^2
Effective Duration - ANSWER-Required if a bond has embedded options:
[(v-)-(v+)]/[2V0(change in curve)]
Modified Duration - ANSWER-[(v-)-(v+)]/[2V0(change in yield)]
Future Value - ANSWER-PV(1+(I/Y)^N)
PV - ANSWER-FV/(1+r)^n
PV of perpetuity - ANSWER-PMT / discount rate
, Approximate percentage price change of a bond - ANSWER-(-)(modified duration)
(ΔYTM)
Nominal Risk Free - ANSWER-Real Risk Free + expected inflation
Required Return - ANSWER-Nominal risk free + liquidity premiums + default risk
premium + maturity risk premium
EAR - ANSWER-[(1+periodic rate)^N ] - 1
EAR continuous - ANSWER-e^r - 1
Bank discount yield - ANSWER-(FV - Price)/(FV) * (360/T)
HPY - ANSWER-[(P1+D1)/P0] - 1
Addition rule - ANSWER-P(A or B) = P(A) + P(B) - P(AB)
Multiplication rule - ANSWER-P(A and B) = P(A)*P(B)
Total Probability Rule - ANSWER-P(A) = P(A|B1)*P(B1)...+P(A|B2)*P(B2)
Expected Value - ANSWER-P(x)*(x)
Covariance - ANSWER-P[(Ra - E(Ra) * (Rb - E(Rb)] - sum for all probabilities that sum
to 1 OR [SDa*SDb*correlation)
Correlation - ANSWER-Covariance(A,B) / SDa*SDb
Portfolio expected return - ANSWER-weight times the E(R) of each stock
Portfolio variance - ANSWER-Wa^2*SDa^2 + Wb^2*SDb^2 +
2WaWb*SDa*SDb*Corr(a,b)
Baye's formula - ANSWER-P(new info) / unconditional probability of new info*prior prob
of event
Economic profit - ANSWER-Total revenue - explicit costs - implicit costs(opportunity
costs)
Normal profit - ANSWER-Acctg profit - economic profit (equals 0)
Total revenue - ANSWER-Price * quantity
Avg total revenue - ANSWER-TR/Q
