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CFA LEVEL 1 FORMULAS
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CFA LEVEL 1 FORMULAS
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CFA LEVEL 1 FORMULASPrice change based on convexity - Answers --duration(change in yield)+1/2(convexity)
(change in yield)^2
Effective Duration - Answers -Required if a bond has embedded options:
[(v-)-(v+)]/[2V0(change in curve)]
Modified Duration - Answers -[(v-)-(v+)]/[2V0(change in yield)]
Future Value - Answers -PV(1+(I/Y)^N)
PV - Answers -FV/(1+r)^n
PV of perpetuity - Answers -PMT / discount rate
Approximate percentage price change of a bond - Answers -(-)(modified duration)
(ΔYTM)
Nominal Risk Free - Answers -Real Risk Free + expected inflation
Z score - Answers -(x-mean)/SD
Roy's safety first ratio - Answers -(E(Rp) - Rtarget)/SD
Mean sampling error - Answers -mean - miu
Standard error - Answers -SD/ sqrt (n)
Confidence interval - Answers -x+/- z*(SD/sqrt(n))
Type 1 error - Answers -rejection of null hypothesis when it is actually true
Type 2 error - Answers -Accepting the null when it is false
t-stat - Answers -t-statistic for tests involving the population mean (location of mean,
difference in means, paired comparisons)
chi square test - Answers -Use chi-square statistic for tests of a single population
variance ([(n-1)SD^2]/Variance - observed)
F stat - Answers -Use F-statistic for tests comparing two population variances.
(SD1/SD2)
Price elasticity of demand - Answers -%Δ Qd/Δ% price
, Income elasticity - Answers -%Δ Qd/%Δ income
Accounting profit - Answers -Total revenue - total explicit/acctg costs
Economic profit - Answers -Total revenue - explicit costs - implicit costs(opportunity
costs)
Normal profit - Answers -Acctg profit - economic profit (equals 0)
Total revenue - Answers -Price * quantity
Avg total revenue - Answers -TR/Q
Marginal revenue - Answers -ΔTR/ΔQ
Marginal cost - Answers -ΔTC/ΔQ
Avg total cost - Answers -total costs/total product
Avg variable cost - Answers -total VC/total product
Shutdown point - Answers -TR < TVC
HHI - Answers -Sum of market shares of each firms squared
GDP Deflator - Answers -Nominal GDP/Real GDP * 100
Fiscal Multiplier - Answers -1/[(1-Marginal propensity to consume)(1-t)
Money multiplier - Answers -1/Reserve Requirement
GDP - Answers -consumption spending + investment + government spending + net
exports (C+I+G+NX)
FX formula layout - Answers -FX rates are expressed as price currency / base currency
and interpreted as the number of units of the price currency for each unit of the base
currency.
CPI - Answers -(basket of good prices)/(basket of goods base year)*100
Real FX rate - Answers -Nominal FX rate * (base currency CPI/price currency CPI)
No-Arbitrage Forward Exchange Rate - Answers -(forward/sport) = (1+price currency
interest rate)/(1+base currency interest rate)
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