CFA Level 1 Formulas Question And Answer.

Price change based on convexity correct answer - -duration(change in yield)+1/2(convexity)(change in yield)^2 Effective Duration correct answer - Required if a bond has embedded options: [(v-)-(v+)]/[2V0(change in curve)] Modified Duration correct answer - [(v-)-(v+)]/[2V0(change in yield)] Future Value correct answer - PV(1+(I/Y)^N) PV correct answer - FV/(1+r)^n PV of perpetuity correct answer - PMT / discount rate Approximate percentage price change of a bond correct answer - (-)(modified duration)(ΔYTM) Nominal Risk Free correct answer - Real Risk Free + expected inflation Required Return correct answer - Nominal risk free + liquidity premiums + default risk premium + maturity risk premium EAR correct answer - [(1+periodic rate)^N ] - 1 EAR continuous correct answer - e^r - 1 Bank discount yield correct answer - (FV - Price)/(FV) * (360/T) HPY correct answer - [(P1+D1)/P0] - 1 EAY correct answer - (1+HPY)^(365/T) - 1 HPY (MMY equation) correct answer - MMY * (T/360) MMY correct answer - HPY * (360/T) Geometric return correct answer - [(1+r1)(1+r2)(1+r3)]^(1/n) - 1 Time weighted return correct answer - [(1+HPY1)(1+HPY2)(1+HPY3)]^(1/n) - 1 Harmonic Mean correct answer - [N/(sum of (1/sample means))] Position of observation correct answer - (n+1)*(k/100) Excess kurtosis correct answer - Sample kurtosis - 3 (3 is normal kurtosis) Mean absolute deviation correct answer - sum of: (mean - sample mean)/n-1 Variance correct answer - (x-mean)^2/N (population) and divided by (n-1) for a sample Coefficient of Variation correct answer - Sample standard deviation/sample mean Sharpe Ratio correct answer - Risk of portfolio - risk free / Standard deviation of portfolio Joint Probability correct answer - P(AB) = P(A|B) * P(B) Addition rule correct answer - P(A or B) = P(A) + P(B) - P(AB)