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CFA Level 1 Formulas || With 100% Accurate Formulas
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CFA Level 1 Formulas || With 100% Accurate Formulas CFA Level 1 Formulas || With 100% Accurate Formulas Sharpe Ratio - ANSWER - Risk of portfolio - risk free / Standard deviation of portfolio Joint Probability - ANSWER - P(AB) = P(A|B) * P(B) Addition rule - ANSWER - P(A or B) = P(A) + P(...

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  • September 17, 2024
  • 38
  • 2024/2025
  • Exam (elaborations)
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  • CFA - Chartered Financial Analyst
  • CFA - Chartered Financial Analyst

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CFA Level 1 Formulas || With 100%
Accurate Formulas




Conceptial Researchers 2024 conceptialresearch@gmail.com

, CFA Level 1 Formulas || With 100%
Accurate Formulas
Sharpe Ratio - ANSWER - Risk of portfolio - risk free / Standard deviation of portfolio

Joint Probability - ANSWER - P(AB) = P(A|B) * P(B)

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

Combination binomial - ANSWER - nCr - order doesn't matter

Permutation binomial - ANSWER - nPr - order matters

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

Binomial Expected value - ANSWER - nP

Binomial variance - ANSWER - np(1-p)

90% confidence interval - ANSWER - +/- 1.645 SDs

95% confidence interval - ANSWER - +/- 1.96 SDs

99% confidence interval - ANSWER - +/- 2.58 SDs

Z score - ANSWER - (x-mean)/SD

Roy's safety first ratio - ANSWER - (E(Rp) - Rtarget)/SD

,Mean sampling error - ANSWER - mean - miu

Standard error - ANSWER - SD/ sqrt (n)

Confidence interval - ANSWER - x+/- z*(SD/sqrt(n))

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

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

Type 1 error - ANSWER - rejection of null hypothesis when it is actually true

Type 2 error - ANSWER - Accepting the null when it is false

t-stat - ANSWER - t-statistic for tests involving the population mean (location of
mean, difference in means, paired comparisons)

chi square test - ANSWER - Use chi-square statistic for tests of a single population
variance ([(n-1)SD^2]/Variance - observed)

F stat - ANSWER - Use F-statistic for tests comparing two population variances.
(SD1/SD2)

Price elasticity of demand - ANSWER - %Δ Qd/Δ% price

Income elasticity - ANSWER - %Δ Qd/%Δ income

Accounting profit - ANSWER - Total revenue - total explicit/acctg costs

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

Marginal revenue - ANSWER - ΔTR/ΔQ

Marginal cost - ANSWER - ΔTC/ΔQ

Avg total cost - ANSWER - total costs/total product

Avg variable cost - ANSWER - total VC/total product

Shutdown point - ANSWER - TR < TVC

HHI - ANSWER - Sum of market shares of each firms squared

GDP Deflator - ANSWER - Nominal GDP/Real GDP * 100

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