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CFA Level 1 Formulas Questions and Answers 100% Correct
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CFA Level 1 Formulas
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CFA Level 1 FormulasPrice 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 - answerNominal risk free + liquidity premiums + default risk premium
+ maturity risk premium
EAR - answer[(1+periodic rate)^N ] - 1
EAR continuous - answere^r - 1
Bank discount yield - answer(FV - Price)/(FV) * (360/T)
HPY - answer[(P1+D1)/P0] - 1
EAY - answer(1+HPY)^(365/T) - 1
HPY (MMY equation) - answerMMY * (T/360)
MMY - answerHPY * (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 - answerSample kurtosis - 3 (3 is normal kurtosis)
Mean absolute deviation - answersum of: (mean - sample mean)/n-1
Variance - answer(x-mean)^2/N (population) and divided by (n-1) for a sample
Coefficient of Variation - answerSample standard deviation/sample mean
Sharpe Ratio - answerRisk of portfolio - risk free / Standard deviation of portfolio
Joint Probability - answerP(AB) = P(A|B) * P(B)
Addition rule - answerP(A or B) = P(A) + P(B) - P(AB)
Multiplication rule - answerP(A and B) = P(A)*P(B)
Total Probability Rule - answerP(A) = P(A|B1)*P(B1)...+P(A|B2)*P(B2)
Expected Value - answerP(x)*(x)
Covariance - answerP[(Ra - E(Ra) * (Rb - E(Rb)] - sum for all probabilities that sum to 1
OR [SDa*SDb*correlation)
Correlation - answerCovariance(A,B) / SDa*SDb
Portfolio expected return - answerweight times the E(R) of each stock
Portfolio variance - answerWa^2*SDa^2 + Wb^2*SDb^2 + 2WaWb*SDa*SDb*Corr(a,b)
Baye's formula - answerP(new info) / unconditional probability of new info*prior prob of
event
Combination binomial - answernCr - order doesn't matter
Permutation binomial - answernPr - order matters
Binomial probability - answernCx * p^x * (1-p)^(n-x)
Binomial Expected value - answernP
Binomial variance - answernp(1-p)
90% confidence interval - answer+/- 1.645 SDs
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