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CFA Level 1 Formulas question with complete solution graded A+ Already passed
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CFA Level 1 Formulas question with complete solution graded A+ Already passedPrice 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...

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  • June 15, 2023
  • 19
  • 2022/2023
  • Exam (elaborations)
  • Questions & answers

Subjects

  • cfa level 1 formulas question with complete soluti
  • price change based on convexity durationchange i
  • effective duration required if a bond has embedded
  • modified duration v v2v0change in yi

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CFA Level 1 Formulas question with
complete solution graded A+ Already
passed

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)



Multiplication rule - correct answer P(A and B) = P(A)*P(B)



Total Probability Rule - correct answer P(A) = P(A|B1)*P(B1)...+P(A|B2)*P(B2)



Expected Value - correct answer P(x)*(x)



Covariance - correct answer P[(Ra - E(Ra) * (Rb - E(Rb)] - sum for all probabilities that sum to 1 OR
[SDa*SDb*correlation)



Correlation - correct answer Covariance(A,B) / SDa*SDb



Portfolio expected return - correct answer weight times the E(R) of each stock



Portfolio variance - correct answer Wa^2*SDa^2 + Wb^2*SDb^2 + 2WaWb*SDa*SDb*Corr(a,b)



Baye's formula - correct answer P(new info) / unconditional probability of new info*prior prob of event



Combination binomial - correct answer nCr - order doesn't matter



Permutation binomial - correct answer nPr - order matters



Binomial probability - correct answer nCx * p^x * (1-p)^(n-x)



Binomial Expected value - correct answer nP

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