FinQuiz Formula Sheet CFA Level I 2018

Reading 6: Time Value of Money * Q!

•   EAR (with Continuous Compounding) 4.   MMWR = M[f &'gNN Z = 0 (IRR
= EAR = 𝑒 (- − 1
represents the MWR)
1.   Interest Rate (i)
•   i = Rf + Inf P + Default Risk 5. PV & FV of Ordinary Annuity
%
5.   TWR:
P + Liquidity P + Maturity P $)*
&/
%^_ #
•   PVOA = L
G[& &'( Z = 𝑃𝑀𝑇 •   TWR (when no external CF) = rTWR =
•   Nominal Rf i rate = Real Rf i Rate + ( )"% /)"h
Inf P 1/G
HPR = rt =
L )"h
% •   FVOA = G[& 𝑃𝑀𝑇G 1 + 𝑟 =
!"# # •   TWR (for more than one periods) =
•   i rate as a growth rate = g = -1 &'( # /&
$" 𝑃𝑀𝑇 rTWR = [(1+rt,1)× (1+rt,2)×… (1+rt,n)] -1
(
•   Size of Annuity Payment = PMT = •   Annualized TWR (when investment is
2.   PV and FV of CF = $" for more than one year)
!" $"  OP  KLLSMG`  !HaGO(
•   PV = = 1 + 𝑅& 1 + 𝑅k … +
&'( # &/
%
_- b×# %
$)* %^
•   PV of Perpetuity = •   PV of Annuity Factor = b 1 + 𝑅L m
_1
( _-
b
•   PV (for more than one Compounding •   TWR (for the year) = rTWR = [(1+R1)×
(- /.×1 (1+R2)×… (1+R365)] -1 where R1 =
per year) = PV= FVN 1 + 6. PV & FV of Annuity Due )"% /)"h
.
%
𝑤ℎ𝑒𝑟𝑒  𝑟7 = 𝑠𝑡𝑎𝑡𝑒𝑑  𝑎𝑛𝑛  𝑖 − 𝑟𝑎𝑡𝑒 &/
%^_ #
)"h
•   PVAD = 𝑃𝑀𝑇 + PMT at t =
•   FVN = 𝑃𝑉 1 + 𝑟 1 (

•   FV (for more than one Compounding PVOA + PMT 6.   Bank Discount Yield = BDY = rBD =
opf $H(/$(MaI
(- .×1 &'( # /&   therefore Price = Par
per year) = FVN = 1 + •   FVAD = 𝑃𝑀𝑇 (1 + 𝑟) = L $H(
. (
L  ×  (qr
•   FV (for Continuous Compounding) = FVOA ×(1+r) 1−
opf
FVN = 𝑃𝑉𝑒 (-×1
B1
CD Reading 7: Discounted Cash Flow Applications 7.   Holding Period Yield = HPY =
$%   /$h '  i%
ED
•   Solving for N = (where LN = $h
B1 &'(
L Q!Z
natural log) 1.   NPV = G[& &'( Z − 𝑐𝑓f
8.   Effective Annual Yield = EAY = 1 +
4. Stated & Effective Rates 𝐻𝑃𝑌 opu/G − 1 (Rule: EAY > BDY)
2.   IRR (when project’s CFs are perpetuity) =
•   Periodic i Rate = Q!
FGHGIJ  KLL  M  NHGI NPV = - IO + =0 9.   Money Market Yield (or CD equivalent
gNN
1O  OP  QO.ROSLJMLT  $I(MOJ7  ML  ULI  VIH( Yield) rMM:
•   Effective (or Equivalent) Ann Rate $%   /$h '  i% opf
3.   HPR = •   rMM = HPY ×  
G
(EAR = EFF%) = 1 + $h
•   rMM = (rBD) ×
𝑃𝑒𝑟𝑖𝑜𝑑𝑖𝑐  𝑖  𝑅𝑎𝑡𝑒 . − 1 !HaI  "HwSI  OP  GxI  *(IH7S(`  yMww
$S(axH7I  $(MaI
 FinQuiz Formula Sheet CFA Level I 2018

opf   (qr # ‰
•   rMM = (Rule: rMM> •   For Even no of obvs locate 17.   Population Var = σ2 = ƒ„% …ƒ /ˆ
opf/ G (qr L 1
median at
rBD) k # … /ˆ ‰
ƒ„% ƒ
10.   Bond Equivalent Yield = BDY = •   For Odd no. of obvs locate 18.   Population S.D = 𝜎 k =
1
L'&
Semiannual Yield × 2 median at
k m ‰
ƒ„% …ƒ /…
19.   Sample Var = s2 =
Reading 8: Statistical Concepts & Market L/&
9.   Mode = obvs that occurs most frequently
Returns in the distribution m … /… ‰
ƒ„% ƒ
20.   Sample S.D = s =
L/&
1.   Range = Max Value – Min Value 10.   Weighted Mean = 𝑋• =   L
M[& 𝑤M 𝑋M =
(w1X1+ w2X2+….+ wnXn) …ƒ /… ‰
2.   Class Interval = i ≥
z/B
where 21.   Semi-var = !O(  Hww  …ƒ ‹… L/&
{
m
•   i = class interval 11.   Geometric Mean = GM = 𝑋& 𝑋k … 𝑋L
22.   Semi-deviation (Semi S.D) =
•   H = highest value with Xi≥0 for i = 1,2,…n.
…ƒ /… ‰
•   L = lowest value, k = No. of classes. 𝑠𝑒𝑚𝑖𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = !O(  Hww  …ƒ ‹…
L L/&
12.   Harmonic Mean = H.M = 𝑋z =   m %
3.   Absolute Frequency = Actual No of ƒ„% ‚
ƒ
…ƒ /y ‰
Observations (obvs) in a given class 23.   Target Semi-var = !O(  Hww  …ƒ ‹y L/&
m
interval ƒ …ƒ where B = Target Value
13.   Population Mean = µ = with 𝑋M > 0
1

K|7OwSGI  !(I}SILa`
for i = 1,2,.,.,n.
4.   Relative Frequency = 24.   Target Semi-Deviation =
*OGHw  1O  OP  U|~7
m
ƒ …ƒ
𝑡𝑎𝑟𝑔𝑒𝑡  𝑠𝑒𝑚𝑖𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒 =
14.   Sample Mean = 𝑋 =     where n =
L
5.   Cumulative Absolute Frequency = Add up …ƒ /y ‰
number of observation in the sample !O(  Hww  …ƒ ‹y L/&
the Absolute Frequencies

15.   Measures of Location: F

6.   Cumulative Relative Frequency = Add up iM7G(M|SGMOL 25.   Coefficient of Variation = CV =
…
the Relative Frequencies •   Quartiles =
‡ where s= sample S.D and 𝑋 = sample
iM7G(M|SGMOL
•   Quintiles = mean
FS.  OP  O|~7  ML  JHGH|H7I u
7.   Arithmetic Mean = iM7G(M|SGMOL
1O.OP  O|~7  ML  GxI  JHGH|H7I •   Deciles = ,
&f )IHL  $O(GPOwMO  N /)IHL  NP  N
` 26.   Sharpe Ratio =
•   Percentiles = Ly = 𝑛 + 1 F.i  OP  $O(GPOwMO  N
8.   Median = Middle No (when observations &ff

are arranged in ascending/descending 27.   Excess Kurtosis = Kurtosis – 3

16.   Mean Absolute Deviation = MAD =
order) m
ƒ„% …Z /…
L
 FinQuiz Formula Sheet CFA Level I 2018

28.   Geometric Mean R ≈ •   Multiplication Rule for two 13.   Standard Deviation (S.D) =
"H(MHLaI  OP  N
𝐴𝑟𝑖𝑡ℎ𝑚𝑒𝑡𝑖𝑐  𝑀𝑒𝑎𝑛  𝑅 − independent events = P(A & B) = 𝑤&k 𝑅M + 𝑤kk 𝑅k + 𝑤ok 𝑅o
k
P(AB) = P(A)× P(B)
Reading 9: Probability Concepts •   Multiplication Rule for three 14.   Correlation (b/w two random variables Ri,
independent events = P(A and B QO~   Nƒ N˜
Rj) = 𝜌 𝑅M 𝑅” =
1.   Empirical Prob of an event E = P(E) = and C) = P(ABC) = P(A) × P(B) ™Nƒ ×™N˜

$(O|  OP  I~ILG  • × P(C)

*OGHw  $(O| 15.   Bayes’ Formula =
8.   Complement Rule (for an event S) = P(S) 𝑃 𝐸𝑣𝑒𝑛𝑡|𝑁𝑒𝑤  𝐼𝑛𝑓𝑜𝑟𝑚𝑎𝑡𝑖𝑜𝑛 =
$(O|  OP  •
2.   Odds for event E =
&/$(O|  OP  •
+ P(SC) = 1 (where SC is the event not S)  
$ 1I•  gLPO(.HGMOL|•~ILG
 ×
$ 1I•  gLPO(.HGMOL
 𝑃 𝑃𝑟𝑖𝑜𝑟  𝑝𝑟𝑜𝑏. 𝑜𝑓  𝐸𝑣𝑒𝑛𝑡
&/$(O|  OP  • 9.   Total Probability Rule:
3.   Odds against event E =
$(O|  OP  •   P(A) = P(AS) + P(ASC) = P(A|S)×P(S) +
16.   Multiplication Rule of Counting = n
P(A|SC)×P(SC)
4.   Conditional Prob of A given that B has factorial = 𝑛! = n (n-1)(n-2)(n-3)…1.
P(A) = P(AS1) + P(AS2) +….+ P(ASn) =
$ Ky
occurred = P(A|B) = → P(B) ≠ 0. P(A|S1)×P(S1) + P(A|S2)×P(S2)…
$ y 17.   Multinomial Formula (General formula for
P(A|Sn)×P(Sn) L!
labeling problem) =  
5.   Multiplication Rule (Joint probability that L% !L‰ !…Lž !

both events will happen): (where S1, S2, …,Sn are mutually exclusive
and exhaustive scenarios) 18.   Combination Formula (Binomial Formula)
L L!
P(A and B) = P(AB) = P(A|B) × P(B) = L  𝐶( = (
=
L/( !(!
P(B and A) = P(BA) = P(B|A) × P(A) 10.   Expected R = E(wiRi) = wiE(Ri)

L where n = total no. of objects and r = no.

6.   Addition Rule (Prob that event A or B will 11.   Cov (Ri Rj) = M[& 𝑝 𝑅M − 𝐸𝑅M 𝑅” −
of objects selected.
occur): 𝐸𝑅”
Cov (Ri Rj) = Cov (Rj Ri) L!
19.   Permutation = L  𝑃( =
P(A or B) = P(A) + P(B) – P(AB) Cov (R, R) = σ2 (R) L/( !

P(A or B) = P(A) + P(B) (when events are

mutually exclusive because P(AB) = 0) 12.   Portfolio Var = σ2 (Rp) = Reading 10: Common Probability Distributions
L L
M[& ”[& 𝑤M 𝑤” 𝐶𝑜𝑣 𝑅M 𝑅”
7.   Independent Events: 1.   Probability Function (for a binomial
σ2 (Rp) = 𝑤&k 𝜎 k 𝑅& + 𝑤kk 𝜎 k 𝑅k + random variable) p(x) = p(X=x) =
•   Two events are independent if: 𝑤ok 𝜎 k 𝑅o + 2𝑤& 𝑤k 𝐶𝑜𝑣 𝑅& , 𝑅k + L L!
P(B|A) = P(B) or if P(A|B) = Ÿ
𝑝Ÿ 1 − 𝑝 L/Ÿ
== 1−
2𝑤& 𝑤o 𝐶𝑜𝑣 𝑅& , 𝑅o + L/Ÿ !Ÿ!R
P(A) 𝑝 L/Ÿ
(for x = 0,1,2….n)
2𝑤k 𝑤o 𝐶𝑜𝑣 𝑅k , 𝑅o
 FinQuiz Formula Sheet CFA Level I 2018

•   x = success out of n trials

•   n-x = failures out of n trials 6.   Roy’s Safety-Frist Criterion = SF Ratio = 14.   Continuously compounded return
• NE /N³ associated with a holding period from 0 to
•   p = probability of success
™E
•   1-p = probability of failure T:
•   n = no of trials. • NE /N´
7.   Sharpe Ratio = = R0,T= ln (ST / S0) or 𝑟f,* = 𝑟*/&,* +
™E
2.   Probability Density Function (pdf) = f(x) 𝑟*/k,*/& + ⋯ + 𝑟f,&
&
8.   Value at Risk = VAR = Minimum $ loss
= |/H 𝑓𝑜𝑟  𝑎 ≤ 𝑥 ≤ 𝑏 = Where,
0           expected over a specified period at a
Ÿ/H specified prob level. rT-I, T = One-period continuously
F(x) = 𝑓𝑜𝑟  𝑎 < 𝑥 < 𝑏
|/H   compounded returns
9.   Mean (µL) of a lognormal random variable
3.   Normal Density Funct = 𝑓 𝑥 = 15.   When one-period continuously
& /(Ÿ/ˆ)‰
= exp (µ + 0.50σ2)
𝑒𝑥𝑝 for − ∞ < 𝑥 < +  ∞ compounded returns (i.e. r0,1) are IID
™ k¤ k™ ‰
10.   Variance (σL2) of a lognormal random random variables.
4.   Estimations by using Normal Distribution: variable = exp (2µ+ σ2) × [exp (σ2) – 1].
𝐸 𝑟f,* = 𝐸 𝑟*/&,* + 𝐸 𝑟*/k,*/& +
•   Approximately 50% of all obsv fall in 11.   Log Normal Price = ST = S0exp (r0,T) ⋯ + 𝐸 𝑟f,& = 𝜇𝑇 And
the interval 𝜇 ± 𝜎
k Where, exp = e and r0,t = Continuously
o
compounded return from 0 to T 𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒 =   𝜎 k 𝑟f,* = 𝜎 k 𝑇
•   Approx 68% of all obvs fall in the
interval 𝜇 ± 𝜎 12.   Price relative = End price / Beg price =
•   Approx 95% of all obvs fall in the S.D. = σ (r0,T) = σ 𝑇
St+1/ St=1 + Rt, t+1
interval 𝜇 ± 2𝜎
•   Approx 99% of all obvs fall in the 16.   Annualized volatility = sample S.D. of
where,
interval 𝜇 ± 3𝜎 one period continuously compounded
Rt, t+1 = holding period return on the stock
•   More precise intervals for 95% of the returns × 𝑇
from t to t + 1.
obvs are 𝜇 ± 1.96𝜎 and for 99% of the
observations are 𝜇 ± 2.58𝜎. Reading 11: Sampling and Estimation
13.   Continuously compounded return
associated with a holding period from t to t
5.   Z-Score (how many S.Ds away from the 1.   Var of the distribution of the sample mean
+ 1:
™‰
mean the point x lies) 𝑧 = =
L
𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑  𝑛𝑜𝑟𝑚𝑎𝑙  𝑟𝑎𝑛𝑑𝑜𝑚  𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 = rt, t+1= ln(1 + holding period return) or 2.   S.D of the distribution of the sample mean
…/ˆ
  (when X is normally distributed) rt, t+1 = ln(price relative) = ln (St+1 / St) = ln ™‰
™ =
(1 + Rt,t+1) L
 FinQuiz Formula Sheet CFA Level I 2018

3.   Standard Error of the sample mean: x−µ 6. Test Statistic for a test of diff b/w two pop
•   When the population S.D (σ) is known 9.   t-ratio = t= means (normally distributed, pop var
™ s/ n unknown but assumed equal)
= 𝜎…   =  
L
•   When the population S.D (σ) is not Reading 12: Hypothesis Testing …% /…‰ / ˆ% /ˆ‰
known = 𝑠…   =  
7
where s = sample t= %/‰ where 𝑆Rk = pooled
Ή ‰
Ï ÎÏ
L '
m% m‰
S.D estimate of s = 1.   Test Statistic =
𝑺𝒂𝒎𝒑𝒍𝒆  𝑺𝒕𝒂𝒕𝒊𝒔𝒕𝒊𝒄  𝑯𝒚𝒑𝒐𝒕𝒉𝒆𝒔𝒊𝒛𝒆𝒅  𝑽𝒂𝒍𝒖𝒆  𝒐𝒇  𝒑𝒐𝒑  𝒑𝒂𝒓𝒂𝒎𝒆𝒕𝒆𝒓   estimator of common variance =
𝑠𝑎𝑚𝑝𝑙𝑒  𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = 𝒔𝒕𝒂𝒏𝒅𝒂𝒓𝒅  𝒆𝒓𝒓𝒐𝒓  𝒐𝒇  𝒔𝒂𝒎𝒑𝒍𝒆  𝒔𝒕𝒂𝒕𝒊𝒔𝒕𝒊𝒄  ∗ L% /& F%‰ '   L‰ /& F‰‰
m
ƒ„% …ƒ /…
‰ where 𝑑𝑓 = 𝑛& +   𝑛k −
  𝑠 k    𝑤ℎ𝑒𝑟𝑒  𝑠 k = L% '  L‰ /k
L/& *
when Pop S.D is unknown, the standard 2.
4.   Finite Population Correction Factor = fpc error of sample statistic is give by 𝑆…   =
 
F 7. Test Statistic for a test of diff b/wn two
1/L L
= where N= population pop means (normally distributed, unequal
1/&
*
and unknown pop var unknown)
when Pop S.D is unknown, the standard
5.   New Adjusted Estimate of Standard Error error of sample statistic is give by 𝜎…   = …% /…‰ / ˆ% /ˆ‰
= (Old estimated standard error × fpc) ™ t= ‰ %/‰
In this df calculated as
  Ή
% ' Ή
L
m% m‰

6.   Construction of Confidence Interval (CI) = Ή ‰ ‰

%  ' Ή
2. Power of Test = 1-Prob of Type II Error m% m‰
Point estimate ± (Reliability factor × 𝑑𝑓 =   ‰ ‰
Ή Ή
Standard error) %
m% m‰
‰
…/ˆh
3. 𝑧 =   Í (when sample size is large or m%
'
m‰
m
•   CI for normally distributed population
™
small but pop S.D is known)
with known variance = 𝑥 ± 𝑧H/k 8. Test Statistic for a test of mean differences
L
…/ˆh
(normally distributed populations,
•   CI for normally distributed population 4. 𝑧 =   (when sample size is large but
F
- unknown population variances)
with unknown variance = 𝑥 ± 𝑧H/k m
L pop S.D is unknown where s is sample
where S = sample S.D. J/ˆÐh
S.D) •   𝑡 =  
FJ
•   sample mean difference =  𝑑   =
7.   Student’s t distribution …/ˆh &
F 5. 𝑡L/& =   - (when sample size is large or   L
M[& 𝑑M
µ = 𝑋 ± 𝑡H/k m L
L m ‰
ƒ„h J% /J
small and pop S.D is unknown and pop •   sample variance = 𝑆Jk =  
L/&
sampled is normally or approximately
x−µ •   sample S.D = 𝑆Jk
8.   Z-ratio = Z = normally distributed)
σ/ n
 FinQuiz Formula Sheet CFA Level I 2018

•   sample error of the sample mean •   𝑋kk is another chi square random (where V = most recent closing price
FÐ variable with one n degrees of and Vx = closing price x days ago)
difference = 𝑠  𝑑   =  
L
freedom •   Alternate Method to calculate M =
"
8. Chi Square Test Statistic (for test ×100
"
12. Spearman Rank Correlation = 𝑟7
concerning the value of a normal
L/& F ‰
6 LM[& 𝑑&k
population variance) 𝑋 k = where =1− 5.   Relative Strength Index = RSI = 100 −
™h‰ 𝑛 𝑛k − 1 &ff
  where
𝑛 − 1 = 𝑑𝑓  𝑎𝑛𝑑  𝑆 k = •   For small samples rejection points for &'NF
m ‰ ÝR  axHLTI7  
𝑠𝑎𝑚𝑝𝑙𝑒  𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒 =     ƒ„h …ƒ /… the test based on 𝑟7 are found using RS =
iO•L  axHLTI7
L/&
table.
•   For large sample size (e.g. n>30) t-test 6.   Stochastic Oscillator (composed of two
9. Chi Square Confidence Interval for
can be used to test the hypothesis i.e. lines %K and %D):
variance
L/& F ‰
𝑛 − 2 &/k 𝑟7
Lower limit = L = and Upper limit 𝑡 =  
‰
…Ñ/‰ 1 − 𝑟7k &/k Q/B&‡
•   %𝐾 = 100   where:
z&‡/B&‡
L/& F ‰
=U== ‰ C = latest closing price, L14 = lowest
…%ÒÑ/‰ Reading 13: Technical Analysis
price in last 14 days, H14 is highest
10. F-test (test concerning differences between 1.   Relative Strength Analysis = price in last 14 days
variances of two normally distributed 𝑷𝒓𝒊𝒄𝒆  𝒐𝒇  𝒂𝒔𝒔𝒆𝒕   •   %D = Average of the last three %K
F%‰
𝑷𝒓𝒊𝒄𝒆  𝒐𝒇  𝒕𝒉𝒆  𝑩𝒆𝒏𝒄𝒉𝒎𝒂𝒓𝒌  𝑨𝒔𝒔𝒆𝒕 values calculated daily.
populations) F =
F‰‰
2.   Price Target for the 7.   Put/Call Ratio (Type of Sentiment
𝑆&k = 1𝑠𝑡  𝑠𝑎𝑚𝑝𝑙𝑒  𝑣𝑎𝑟  𝑤𝑖𝑡ℎ  𝑛&  𝑜𝑏𝑠   𝑆&k = •   Head and Shoulders = Neckline – Indicators) =
𝑽𝒐𝒍𝒖𝒎𝒆  𝒐𝒇  𝑷𝒖𝒕  𝑶𝒑𝒕𝒊𝒐𝒏𝒔  𝑻𝒓𝒂𝒅𝒆𝒅
𝑽𝒐𝒍𝒖𝒎𝒆  𝒐𝒇  𝑪𝒂𝒍𝒍  𝑶𝒑𝒕𝒊𝒐𝒏𝒔  𝑻𝒓𝒂𝒅𝒆𝒅
2𝑛𝑑  𝑠𝑎𝑚𝑝𝑙𝑒  𝑣𝑎𝑟  𝑤𝑖𝑡ℎ  𝑛k  𝑜𝑏𝑠 (Head – Neckline)
𝑑𝑓& =   𝑛& − 1  𝑛𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟  𝑑𝑓   •   Inverse Head and Shoulders =
8.   Short Interest Ratio (Type of Sentiment
𝑑𝑓k =   𝑛k − 1  𝑑𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟  𝑑𝑓 Neckline + (Neckline– Head)
𝑺𝒉𝒐𝒓𝒕  𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕
Indicators) =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆  𝑫𝒂𝒊𝒍𝒚  𝑻𝒓𝒂𝒅𝒊𝒏𝒈  𝑽𝒐𝒍𝒖𝒎𝒆
𝑷𝟏 '𝑷𝟐 '𝑷𝟑 ….'𝑷𝒏
11. Relation between Chi Square and F- 3.   Simple Moving Average =
𝑵
…%‰ 9.   Arms Index TRIN i.e. Trading Index (Type
.
distribution = 𝐹 =   … ‰ where: of Flow of funds Indicator) =
‰
L 4.   Momentum Oscillator (or Rate of Change
•   𝑋&kis one chi square random variable Oscillator ROC): 𝐴𝑟𝑚  𝐼𝑛𝑑𝑒𝑥  𝑜𝑟  𝑇𝑅𝐼𝑁 =  
1O.OP  KJ~HL  g77SI7  ÷1O.OP  iIawML  g77SI7
with one m degrees of freedom "OwS.I  OP  KJ~HL  g77SI7÷"OwS.I  OP  iIawML  g77SI7
•   Momentum Oscillator Value M = (V-
Vx)  ×100
 FinQuiz Formula Sheet CFA Level I 2018

Reading 14: Topics in Demand & Supply 3.   Concentration Ratio = 8.   GDP = National income + Capital
Analysis *ìò  üý  )í(ñ)  +í(ìñ)  üý  î,ñ  (íõ-ñ)î  &f  ýéõò) consumption allowance + Statistical
.üîí(  /íõ0ñî  *í(ñ)
discrepancy
d
1.   Q x = f(Px, I, Py)
4.   Herfindahl-Hirshman Index = Sum of the
9.   National Income = Compensation of
J
squares of the market shares of the top N
Price Elasticity of Demand = 𝐸RŸ = employees + Corp & Govt enterprise
÷øÐ
companies in an industry
%  ∆  éê  ëìíêîéîï  ðñòíêóñó øÐ ùúJŸ ù$Ÿ profits before taxes + Interest income +
= ÷E =   unincorporated business net income + rent
%  ∆    éê  ôõéöñ $Ÿ úJŸ
E Reading 16: Aggregate Output, Prices &
+ indirect business taxes less subsidies
Economic Growth
2.   Income Elasticity of Demand = 𝐸gJ = 10.   Total Amount Earned by Capital = Profit +
%  ∆  éê  ëìíêîéîï  ðñòíêóñó ùúJŸ ùg 1.   Nominal GDP t = Prices in year t ×
  = =   Capital Consumption Allowance
%  ∆  éê  ûêöüòñ   g úJŸ Quantity produced in year t

J
3.   Cross Elasticity = 𝐸R` = 11.   PI = National income – Indirect business
2.   Real GDP t = Prices in the base year ×
%  ∆éê  ëìíêîéîï  ðñòíêóñó  üý  þüüó  ÿ taxes – Corp income taxes – Undistributed
  =  = Quantity produced in year t
%  ∆  éê  ôõéöñ  üý  þüüó  ! Corp profits + Transfer payments
ùúJŸ ù$`
 
$` úJŸ 3.   Implicit price deflator for GDP or GDP
12.   Personal disposable income (PDI) =
deflator =
+í(ìñ  üý  öìõõñêî  ïõ  üìî1ìî  íî  öìõõñêî  ïõ  1õéöñ) Personal income – Personal taxes OR GDP
4.   Total cost of production = TC = (w)(L) + ×
(r)(K) +í(ìñ  üý  öìõõñêî  ïõ  üìî1ìî  íî  2í)ñ  ïõ  1õéöñ) (Y) + Transfer payments (F) – (R/E +
100 Depreciation) – direct and indirect taxes
5.   TR = (P)(Q) (R)
4.   Real GDP = [(Nominal GDP / GDP
6.   MR = ΔTR/ΔQ deflator) ÷ 100] 13.   Business Saving = R/E + Depreciation
$ ùú ú ù$ "ô
7.   MR=   +   =P+Q 3üòéêí(  þðô 14.   Household saving = PDI - Consumption
"ë "ë "ë 5.   GDP deflator =  ×100
4ñí(  þðô  
expenditures - Interest paid by consumers
Reading 15: The firm & Market Structures to business - Personal transfer payments to
6.   GDP = Consumer spending on final good
foreigners
& services + Gross private domestic invst
1.   In perfect competition, Marginal revenue =
+ Govt. spending on final goods & services
Avg. Revenue = Price = Demand 15.   Business sector saving = Undistributed
+ Govt. gross fixed invst + Exp – Imp +
corporate profits + Capital consumption
Statistical discrepancy
2.   Marginal Revenue = Price  × 1 − allowance
& 7.   Net Taxes = Taxes – Transfer payments
 
ôõéöñ  '(í)îéöéîï  üý  ðñòíêó
 FinQuiz Formula Sheet CFA Level I 2018

16.   Total Expenditure = Household
consumption (C) + Investments (I) +
Government spending (G) + Net exports
(X-M)
17.   Private Sector Saving = Household Saving
+ Undistributed Corporate Profits +
 4ñ)ñõ+ñ
 4ñB
 üõ
 õñ)ñõ+ñ
 õíîéü
Capital Consumption Allowance
18.   GDP = Household consumption + Private
Sector Saving + Net Taxes
19.   Domestic saving = Investment + Fiscal
balance + Trade balance
20.   Trade Balance = Exports – Imports
26.   Total Factor Productivity growth = Growth Reading 18: Monetary & Fiscal Policy
in potential GDP – [Relative share of labor
in National Income × (Growth in labor) + 1.   Total Money created = New deposit/
[Relative share of capital in National Reserve Req
Income × (Growth in capital)]
2.   Money Multiplier =
27.   Growth in potential GDP = Growth in &
technology + (Relative share of labor in
National Income × Growth in Labor) +
3.   Narrow money = M1= currency held
(Relative share of capital in National
outside banks + checking accounts +
Income × Growth in capital]
traveller’s check
28.   Capital share =Corporate profits + net
4.   Broad money = M2 = M1 + time deposits
interest income + net rental income +
+ saving deposits
(depreciation/ GDP)

'ò1(üïññ  6üò1ñê)íîéüê  
5.   M3 = M2 + deposits with non-bank
21.   Fiscal balance = Government Expenditure 29.   Labor share =
þðô financial institution
– Taxes = (Savings – Investment) – Trade
Balance
Reading 17: Understanding Business Cycles 6.   Quantity Theory of Money = M × V = P ×
22.   Average propensity to consume (APC) =
5--õñ-íîñ  6üê)ìò1îéüê
Y where,
4ñí(  ûêöüòñ 1.   Price index at time t2 = M = Quantity of money
"HwSI  OP  GxI  QO.7S.RGMOL  yH7{IG  HG  G  ‰
×100 V = Velocity of circulation of money
"HwSI  OP  GxI  QOL7S.RGMOL  yH7{IG  HG  G  %
23.   Quantity theory of money equation: ôõéöñ  ûêóñ7  íî  îéòñ  îk  
P = Average price level
Nominal Money Supply × Velocity of Inflation Rate = −1 Y = Real output
&ff
Money = Price Level × Real Income or
Expenditure 2.   Fisher Index = 𝐼𝑝  ×𝐼𝐿 (where, IL = 7.   Neutral Rate = Trend Growth + Inflation
Laspeyres index and Ip = Paasche Index) Target
24.   %  ∆ in unit labor cost = %  ∆  in nominal
wages - %  ∆  in productivity 3.   𝑈𝑛𝑖𝑡  𝑙𝑎𝑏𝑜𝑟  𝑐𝑜𝑠𝑡  (𝑈𝐿𝐶)  𝑖𝑛𝑑𝑖𝑐𝑎𝑡𝑜𝑟   = 8.   Impact of Taxes and Government
.üîí(  (í2üõ  öüò1ñê)íîéüê  1ñõ  ,üìõ  1ñõ  :üõ0ñõ   Spending: The Fiscal Multiplier
25.   Economic growth = Annual %  ∆  in real ;ìî1ìî  1ñõ  ,üìõ  1ñõ  :üõ0ñõ The net impact of the government sector
GDP on AD:
3üòéêí(  þðô
4.   Velocity  of  money   =   •   G – T + B = Budget surplus or Budget
/üêñï  *ì11(ï
deficit
 FinQuiz Formula Sheet CFA Level I 2018

where, G = government spending , T

=taxes, B =transfer benefits 2.   Terms of Trade (as an index number) = 2.   Real  exchange  rate(ð/ý) = (Só ý ×Pý )/Pó =
Disposable income = Income – Net 5+-  1õéöñ  üý  ñ71üõî)
•   Só ý ×(Pý /Pó )
5+-  1õéöñ  üý  éò1üõî)
taxes = (1 – t) Income
where, Net taxes = taxes – transfer 3.   Real  Exchange  Rate  óüòñ)îéö/ýüõñé-ê =
3.   Net exports = Value of a country's (exports
payments, t = net tax rate 6ôûR
–imports) Só/ý ×
6ôûS

9.   Fiscal Multiplier (in the absence of taxes)

4.   Net welfare effect = consumer’s surplus
= 1/(1 - MPC) 4.   Change  in  Real  Exchange  rate =
loss + producer’s surplus gain + Govt. ∆UR
•   MPS = 1 – MPC. ∆*S/R &'
UR
revenue   1 + × ∆U −1
•   Total increase in income and spending *S/R &' S
US
= Fiscal multiplier × G
5.   Closed Economy’s output = Y = C+I+G
&
5.   Direct Quote =
10.   Fiscal Multiplier (in the presence of taxes) ûêóéõñöî  ëìüîñ
6.   Open Economy’s output = Y =
6.   Points on a forward rate quote = Fwd X-
C+I+G+(X-M)
•   MPC (with taxes) = MPC × (1 - t) rate quote –Spot X-rate quote
&
•   Current Account Balance = X-M = Y-
•   Fiscal multiplier = C+I+G
&/)$Q   &/G Vüõ:íõó  1üéêî)
7.   Forward rate = Spot X-rate +
•   Total ↑ in income and spending = &f,fff

Fiscal multiplier × G 7.   Consumption = Income + transfers – taxes

•   Initial ↑ in consumption due to – saving 8.   Forward  premium/discount  (in  %)   =
)1üî  ÿ/õíîñ'(ýüõ:íõó  1üéêî)/&f,fff)
reduction in taxes = MPC × tax cut   −1
)1üî  ÿ/õíîñ
amount C = Yd - Sp =Y+R-T-Sp And,
•   Total or cumulative effect of tax cut = CA = Sp- I+ Govt surplus (or Govt saving)
9.   To convert spot rate into a forward quote
multiplier × initial change in = Sp- I+ (T- G- R)Sp + Sg = I + CA
(when points are represented as %) = Spot
consumption exchange rate × (1 + % premium or
where, Sg = Govt savings
discount)
11.   Cumulative multiplier = Sp = I + CA – Sg
öìòì(íîé+ñ  ñýýñöî  üê  õñí(  þðô  ü+ñõ  î,ñ  î:ü  ïñíõ) •   Current Account Imbalance CA = Sp
%  OP  Di$
10.   Arbitrage relationship is stated as follows:
+ Sg – I
&
•   1 + 𝑖J = 𝑆´ 1 + 𝑖P
Reading 19: International Trade & Capital !´
Reading 20: Currency Exchange Rates Ð
Ð
Flows •   In case of indirect quote, Arbitrage
1.   Foreign  price  level  in  domestic  currency = relationship is: 1 + 𝑖J =
ôõéöñ  üý  ñ71üõî)
1.   Terms of trade =
ôõéöñ  üý  éò1üõî)
Só/ý ×Pý 1/𝑆P/J 1 + 𝑖P 𝐹P/J
 FinQuiz Formula Sheet CFA Level I 2018

&'M´ 16.   Basic idea of Marshall-Lerner condition = 3.   Assets = Liabilities + Contributed Capital
•   𝐹´ = 𝑆´
&'MÐ
Ð Ð 𝜔Ÿ 𝜀Ÿ + 𝜔) 𝜀) − 1 > 0 where, + Beg R.E + Revenue – Expenses –
•   Forward rate as a % of spot rate = Dividends
!´/Ð &'M´
= ɷx=share of exports
F´/Ð &'MÐ
ԐX=price elasticity of foreign demand for Reading 23: Financial Reporting Standards
domestic country exports
11.   Return on hedged foreign investment
ɷM=share of imports
(with a quoted forward rate) = 𝑆P/J 1 +
ԐM =price elasticity of domestic country Reading 24: Understanding Income Statements
&
𝑖P demand for imports
!´/Ð
1.   Revenue recognized on Prorated basis =
17.   Trade balance = Income (GDP) – .üîí(  5òüìêî  üý  6ü)î  
12.   Expected % change in the spot rate = .éòñ  üý  î,ñ  öüêîõíöî
FZ^% M´ /MÐ
Domestic expenditure = Absorption
− 1 = %∆𝑆G'& =
FZ &'MÐ
2.   Revenue recognized under Percentage-of-
Reading 21: Financial Statement Analysis: An
Completion Method = % of Total cost
•   Forward points: 𝐹P/J − 𝑆P/J = Introduction
spent by the firm × Total Contract
M´ /MÐ
𝑆P/J 𝜏 (where 𝜏 is quoted Revenue
&'MÐ X 1.   Gross Profit = Revenue – Cost of sales
interest rate period)
3.   Revenue recognized when outcome cannot
2.   Operating Profit or EBIT = Gross profit –
13.   Relationship between the trade balance and be reliably measured = Contract costs
Operating costs + Other operating income
expenditure/ saving decisions: incurred
= Ex – Im = (Sav – Inv) + (T – G) 3.   Profit before tax = EBIT – Interest expense
4.   Revenue recognized under installment
ôõüýéî  
where T= taxes net of transfers 4.   Profit after tax = Profit before tax – method =   ×  Cash receipt
*í(ñ)
G= government expenditures) Income tax expense 5.   Wgtd Avg cost per unit =
.üîí(  6ü)î  üý  þüüó)  í+íé(í2(ñ  ýüõ  *í(ñ

14.   Price elasticity of demand = Ԑ = .üîí(  ìêéî)  í+íé(í2(ñ  ýüõ  *í(ñ

Reading 22: Financial Reporting Mechanics
%  ö,íê-ñ  éê  Bìíêîéîï %  ∆  ë
=– 6.   COGS using Wghtd Avg Cost = No of
%  ö,íê-ñ  éê  1õéöñ %  ∆  ô
1.   Owner’s Equity = Contributed Capital +
units sold × Wghtd Avg cost per unit
R.E
15.   Expenditure (R) = Price × Quantity = P ×
Q 7.   COGS using LIFO = Total cost – Value of
2.   End R.E = Beg R.E + Net income –
•   % ∆ in expenditure = % ∆ R = % ∆ P ending inventory
Dividends
+ % ∆ Q = (1- Ԑ) % ∆ P
 FinQuiz Formula Sheet CFA Level I 2018

8.   Annual Depreciation Expense (using Reading 25: Understanding Balance Sheets 9.   Vertical common-size balance-sheet =
6ü)î/4ñ)éóìí(  \í(ìñ bí(íêöñ  ),ññî  5òüìêî
Straight-Line Method) =
')îéòíîñó  ])ñýì(  ^éýñ .üîí(  5))ñî)
1.   Percentage of A/C Receivable estimated to
be uncollectible = 6ìõõñêî  5))ñî)
9.   Annual Depreciation Expense (Declining 5((ü:íêöñ  ýüõ  ðüì2îýì(  5/6 10.   Current ratio =
&ff% 6ìõõñêî  ^éí2é(éîéñ)
balance method) = × Acceleration þõü))  íòüìêî  üý  5/6  4ñöñé+í2(ñ
])ñýì(  (éýñ
factor (say 200% or 2) × Net Book Value 11.   Quick (acid test) =
2.   Net Identifiable Assets = Fair value of 6í),'/íõ0ñîí2(ñ  )ñöìõéîéñ)'4ñöñé+í2(ñ)
3ñî  ûêöüòñ/ôõñýñõõñó  ðé+éóñêó) identifiable assets – Fair value of liabilities 6ìõõñêî  ^éí2é(éîéñ)
10.   Basic EPS =
_-,î  5+-  3ü  üý  ),íõñ)  üìî)îíêóéê- & contingent liabilities
6í),'/íõ0ñîí2(ñ  )ñöìõéîéñ)  
3.   Amortized cost of PPE = Historical cost – 12.   Cash ratio =
6ìõõñêî  ^éí2é(éîéñ)
11.   Diluted EPS for preferred stock = Accumulated depreciation – Impairment
3ñî  ûêöüòñ
_-,î  5+-  3ü  üý  ),íõñ)  ü/)'3ñ:  öüòòüê  ),íõñ)  î,íî  
losses 13.   Long-term debt-to-equity =
:üì(ó  ,í+ñ  2ññê  é))ìñó  íî  öüê+ñõ)éüê .üîí(  (üê-/îñõò  óñ2î
4.   Carrying value for PPE under revaluation .üîí(  'Bìéîï
12.   Diluted EPS for convertible debt = model
3ñî  éêöüòñ  '5.  M  üê .üîí(  ðñ2î
öüê+ñõîé2(ñ  óñ2î/ôõñýñõõñó  ðé+ = Fair value at date of revaluation – 14.   Debt-to-Equity =
.üîí(  'Bìéîï
_-,î  5+-  üý  ),íõñ)  ü/)'5óóéîéüêí(  öüòòüê  ),íõñ)  
î,íî  :üì(ó  ,í+ñ  2ññê  é))ìñó  íî  öüê+ñõ)éüê
Accumulated depreciation (if any)
.üîí(  ðñ2î
15.   Total Debt =
13.   Diluted EPS using Treasury Stock Method 5.   Amortized cost of PPE = Historical cost – .üîí(  5))ñî)

= Accumulated depreciation – Impairment

.üîí(  5))ñî)
(3ñî  ûêöüòñ/ôõñýñõõñó  óé+éóñêó)) losses 16.   Financial Leverage =
[_-,î  5+-  üý  ),íõñ)'(3ñ:  ),íõñ)  íî  ü1îéüê  ñ7ñõöé)ñ/ .üîí(  'Bìéîï
*,íõñ)  1ìõö,í)ñó  :éî,  6í),  õñöñé+ñó  ì1üê  ñ7ñõöé)ñ  )  ×
(ôõü1üõîéüê  üý  !õ)] 6.   Carrying value for PPE under revaluation Reading 26: Understanding Cash Flow
model Statements
3ñî  ûêöüòñ
14.   Net Profit Margin = = Fair value at date of revaluation –
4ñ+ñêìñ
Accumulated depreciation (if any) 1.   End Cash = Beg cash + Cash receipts
þõü))  ôõüýéî (from operating, investing, and financing
15.   Gross Profit Margin =
4ñ+ñêìñ 7.   Deferred tax liability = Taxable income < activities) – Cash payments (for operating,
Reported Financial Statement Income investing, and financing activities)
16.   Comprehensive EPS = EPS + Other before taxes
Comprehensive Income per share
2.   End A/c Receivable = Beg A/c Receivable
8.   Deferred tax liability = Actual income tax + Revenues – Cash collected from
payable in a period < Income tax expense customers
 FinQuiz Formula Sheet CFA Level I 2018

3.   Cash received from customers = Revenue 13.   Cash paid for income taxes = Income tax 6V;
24.   Cash to income =
;1ñõíîéê-  éêöüòñ
– Increase in a/c receivable expense – Increase in income tax payable

25.   Cash flow per share =

4.   Purchases from suppliers = COGS + 14.   Historical cost of equipment sold = Beg 6V;/ôõñýñõõñó  ðé+éóñêó)
Increase in inventory balance equipment + Equipment purchased 3ü  üý  öüòòüê  ),íõñ)  ü/)
– End balance equipment
5.   Cash paid to suppliers = Cogs + Increase 26.   Debt Coverage =
6V;
.üîí(  ðñ2î
in inventory – Increase in a/c payable 15.   Accumulated Dep on equipment sold =
27.   Interest Coverage =
Beg balance accumulated dep + Dep 6V;'ûêîñõñ)î  1íéó'.í7ñ)  1íéó
6.   End Inventory = Beg inventory + expense – End balance accumulated dep ûêîñõñ)î  1íéó
Purchases – COGS 28.   Reinvestment =
6V;
6í),  1íéó  ýüõ  (üê-/îñõò  í))ñî)
16.   Cash received from sale of equipment =
7.   End a/c payable = Beg a/c payable + Historical cost of equipment sold –
Purchases – Cash paid to suppliers Accumulated dep on equipment sold + 29.   Debt payment =
6V;
gain on sale of equipment 6í),  1íéó  ýüõ  ^.  óñ2î  õñ1íïòñêî
8.   Cash paid to employees = Salary and
wages expense – Increase in salary and 17.   Dividends paid = Beg balance of R.E + 6V;
30.   Dividend payment =
wages payable Net income – End balance of R.E ðé+éóñêó)  1íéó

9.   End salary and wages payable = Beg salary 18.   FCFF = Net income + Non-cash charges + 31.   Investing and Financing =
6V;  
and wages payable + Salary and wages Interest expense (1 – tax rate) – Cap exp – 6í),  üìîý(ü:)  ýüõ  éê+ñ)îéê-  íêó  ýéêíêöéê-  íöîé+éîéñ)
expense – cash paid to employees WC expenditures
19.   FCFF = CFO + Interest expense (1 – Tax Reading 27: Financial Analysis Techniques
10.   Cash paid for other operating expenses = rate) – Cap exp
Other operating expenses – Decrease in 1.   Compound Growth Rate =
prepaid expenses – Increase in other 20.   FCFE = CFO – Cap exp + Net borrowing %
'êó  \í(ìñ de  eR  fghieSj
accrued liabilities −  1
bñ-  \í(ìñ
6V;
21.   CF to revenue =
3ñî  4ñ+ñêìñ
11.   Cash paid for interest = Interest expense + ^ü))ñ)  íêó  '71ñê)ñ)
Decrease in interest payable 2.   Combined ratio =
6V; 3ñî  ôõñòéìòó  'íõêñó
22.   Cash ROA =
5+ñõí-ñ  .üîí(  5))ñî)
12.   End Interest Payable = Beg interest ;1ñõíîéê-  ûêöüòñ
3.   Operating ROA =
6V; 5+-  .üîí(  5))ñî)
payable + Interest expense – Cash paid for 23.   Cash ROE =
5+ñõí-ñ  ),íõñ,ü(óñõ)c ñBìéîï
interest 3ñî  ûêöüòñ
4.   ROA = or
5+-  .üîí(  5))ñî)
 FinQuiz Formula Sheet CFA Level I 2018

ROA = 3ü  üý  ðíï)  éê  1ñõéüó 24.   Coefficient of Variation of Revenues =

14.   No of Days of Payables =
3ñî  ûêöüòñ'ûêîñõñ)î  '71ñê)ñ   &/.í7  õíîñ ôíïí2(ñ)  .ìõêü+ñõ *.ð    üý  4ñ+ñêìñ
5+-  .üîí(  5))ñî) 5+-    4ñ+ñêìñ
4ñ+ñêìñ
15.   WC Turnover =
ûêöüòñ  .í7 5+-  _6
5.   Effective Tax Rate = 25.   Monetary Reserve Requirement (Cash
'íõêéê-)  2ñýüõñ  .í7 4ñ)ñõ+ñ)  ,ñ(ó  í)  6ñêîõí(  bíê0
4ñ+ñêìñ Reserve Ratio) =
16.   Fixed Asset Turnover = *1ñöéýéñó  ðñ1ü)éî  ^éí2é(éîéñ)  
5+-  3ñî  Vé7ñó  5))ñî)
6.   Vertical common size income statement =
ûêöüòñ  )îíîñòñêî  ûîñò 26.   Liquid Asset Requirement =
4ñ+ñêìñ
4ñ+ñêìñ 17.   Total Asset Turnover = 4ñíóé(ï  /íõ0ñîí2(ñ  *ñöìõéîéñ)
5+-  .üîí(  5))ñî)
*1ñöéýéñó  ðñ1ü)éî  ^éí2é(éîéñ)
7.   Horizontal common size balance sheet =
bí(íêöñ  ),ññî  éîñò  éê  !ñíõ  k 18.   Pretax margin =
'íõêéê-)  2ñýüõñ  îí7  2ìî  íýîñõ  éêîñõñ)î
27.   Net Interest Margin =
bí(íêöñ  ),ññî  éîñò  éê  !ñíõ  &
3ñî  ûêîñõñ)î  ûêöüòñ
4ñ+ñêìñ
.üîí(  ûêîñõñ)î  'íõêéê-  5))ñî)
8.   Inventory turnover =
6ü)î  üý  )í(ñ)  üõ  öü)î  üý  -üüó)  )ü(ó 19.   Return on Total Capital =
'bû. 28.   Sales per Square Meter =
5+-  ûê+ñêîüõï
*,üõî  íêó  (üê-  îñõò  óñ2î  íêó  ñBìéîï 4ñ+ñêìñ
.üîí(  4ñîíé(  *1íöñ  éê  *Bìíõñ  /ñîñõ)
9.   Days of Inventory on Hand (DOH) =
3ñî  ûêöüòñ
3ü  üý  ðíï)  éê  1ñõéüó 20.   ROE = 4üüò  4ñ+ñêìñ
5+-  .üîí(  'Bìéîï 29.   Average Daily Rate =
ûê+ñêîüõï  .ìõêü+ñõ 3ü  üý  4üüò)  )ü(ó
4ñ+ñêìñ •   ROE = ROA × Leverage
10.   Receivables Turnover =
5+-  4ñöñé+í2(ñ) •   ROE = Tax Burden × Interest Burden 3ü  üý  4üüò)  *ü(ó
30.   Occupancy Rate =
× EBIT Margin × Total Asset 3ü  üý  4üüò)  í+íé(í2(ñ
11.   Days of Sales Outstanding (DSO) Turnover × Leverage
3ü  üý  ðíï)  éê  ôñõéüó 'bû.
= 31.   EBIT Interest Coverage =
4ñöñé+í2(ñ)  îìõêü+ñõ þõü))  ûêîñõñ)î  
21.   Return on Common Equity =
3ñî  ûêöüòñ/ôõñýñõõñó  ðé+éóñêó) 'bû.ð5
12.   Avg A/c Receivable Balance = Avg Days’ 5+-  6üòòüê  'Bìéîï 32.   EBITDA Interest Coverage =
þõü))  ûêîñõñ)î  
Credit Sales × DSO or
*í(ñ)
Avg A/c Receivable Balance = = 22.   Coefficient of Variation of Operating 33.   FFO Interest Coverage =
.ìõêü+ñõ
*í(ñ) *.ð  üý  ;1ñõíîéê-  ûêöüòñ VV;'ûêîñõñ)î  ôíéó/;1ñõíîéê-  ^ñí)ñ  5óqì)îòñêî)  
klm
Income =
5+-  ;1ñõíîéê-  ûêöüòñ þõü))  ûêîñõñ)î  
nop

23.   Coefficient of Variation of Net Income = 'bû.

ôìõö,íñ)   34.   Return on Capital = =
13.   Payables turnover = *.ð  üý  3ñî  ûêöüòñ 5+-  6í1éîí(
5+-  îõíóñ  1íïí2(ñ)
'bû.
5+-  3ñî  ûêöüòñ
5+-  ('Bìéîï'3üê  öìõõñêî  óñýñõõñó  îí7ñ)'óñ2î)
 FinQuiz Formula Sheet CFA Level I 2018

VV; Reading 28: Inventories 5.   Impairment Loss (IFRS) = Recoverable

35.   FFO to Debt =
.üîí(  ðñ2î
Amount – Net Carrying Amount
6V;/6í1  '71 1.   NRA = Estimated Selling Price –
36.   Free Operating CF to Debt =
.üîí(  ðñ2î Estimated Costs of completion and Where, Recoverable amount = Max [(Fair
disposal value – Costs to sell); Value in Use)] and
37.   Discretionary CF to Debt = Value in use = PV of Expected Future CFs
6V;/6í1  ñ71/ðé+éóñêó)  1íéó  
2.   Inventory amount net of valuation
.üîí(  óñ2î
allowance = Carrying amount of Inventory 6.   Impairment Loss (US GAAP) = Asset’s
38.   Net CF to Capital expenditures = – Write downs Fair Value – Carrying Amount. If Carrying
VV;/ðé+éóñêó)   amount > Undiscounted Expected Future
6í1  ñ71 3.   (NRA – Normal Profit Margin) ≤ MV ≤ Cash Flows
NRA
.üîí(  óñ2î
39.   Debt to EBITDA = Reading 30: Income Taxes
'bû.ð5
Reading 29: Long-Lived Assets
40.   Total Debt to total debt plus Equity = 1.   Deferred tax asset = Company’s taxable
.üîí(  óñ2î 1.   Dep Exp under Straight-line Method = income > Accounting profit
.üîí(  óñ2î''Bìéîï ðñ1õñöéí2(ñ  6ü)î
=
')îéòíîñó  ])ñýì(  ^éýñ
ré)îüõéöí(  6ü)î/')îéòíîñó  4ñ)éóìí(   )í(+í-ñ \í(ìñ 2.   Tax base of revenue received in advance =
65/6^ 4.'
41.   Z-Score = 1.2 × + 1.4 × + ')îéòíîñó  ])ñýì(  ^éýñ Carrying amount – Any amount of revenue
.5 .5
'bû. /\  üý  )îüö0 that will not be taxed at a future date
3.3 × + 0.6 × + 1.0 2.   Dep Exp under Units-of-Production
.5 b\  üý  (éí2é(éîéñ) 3.   Reported Effective Tax Rate =
*í(ñ) Method = Depreciable Cost × ûêöüòñ  .í7  ñ71ñê)ñ
×
.5 ôõüóìöîéüê  éê  î,ñ  ôñõéüó   ôõñ  îí7  éêöüòñ  üõ  5ööüìêîéê-  ôõüýéî
')îéòíîñó  ôõüóìöîé+ñ  6í1íöéîï  
*ñ-òñêî  ôõüýéî  (^ü)))
42.   Segment margin = 4.   Deferred tax liability = Carrying amount
*ñ-òñêî  4ñ+ñêìñ
3.   Carrying amount under cost model = of asset > Tax base of asset
*ñ-òñêî  4ñ+ñêìñ Historical Cost – Accumulated Dep or
43.   Segment turnover =
*ñ-òñêî  5))ñî) Amortization 5.   Deferred tax asset = Carrying amount of
asset < Tax base of asset
*ñ-òñêî  ôõüýéî  (^ü))) 4.   Carrying amount under revaluation model
44.   Segment ROA =
*ñ-òñêî  5))ñî)
= Fair value at the date of revaluation – 6.   Deferred tax asset = Carrying amount of
*ñ-òñêî  ^éí2é(éîéñ)
Any subsequent Accumulated Dep or liability > Tax base of asset
45.   Segment Debt Ratio = Amortization
*ñ-òñêî  5))ñî)
7.   Deferred tax liability = Carrying amount of
liability < Tax base of asset
 FinQuiz Formula Sheet CFA Level I 2018

Reading 31: Non-current (Long-term) 10.   Amount of Bonds payable initially

8.   Company’s tax expense (or credit) Liabilities reported on the balance sheet under US
reported on its income statement = Income GAAP = Sales proceeds
tax liability currently payable + ∆ in 1.   Annual Interest Payment = Face Value ×
deferred tax asset / liability Coupon Rate 11.   Bond i-exp. under effective i-rate method
Where, = Carrying value of the bonds at the beg.
•   Income Tax liability currently 2.   Sale proceeds of bond = Sum of PV of of the period × Effective i-rate
payable = Taxable income × Tax Interest Payments + PV of Face value of
rate Bond 12.   Bond Interest Payment under effective
•   ∆in deferred tax asset / liability = 3.   When Face value - Sale proceed is > zero, interest rate method = Face value of the
Diff b/w the balance of the discount bonds × Contractual (coupon) rate
deferred tax asset / liability for the
current period and the balance of 4.   When Face value – Sale proceed is < zero, 13.   Amortization of the discount or premium
the previous period. premium under effective interest rate method =
Bond interest expense – Bond interest
9.   The company’s tax expense (or credit) 5.   Bond payable = Face value – (+) Discount payment
reported on its income statement = Taxes (Premium)
payable + (∆ Deferred tax liability - ∆ 14.   Bond Discount/Premium Amortization
Deferred tax asset) 6.   Total Interest Expense (in case of discount) under Straight-line Method =
= Periodic interest payments + büêó  ðé)öüìêî  üõ  1õñòéìò    
Where,
3ü  üý  ûêîñõñ)î  ôñõéüó)
•   Income Tax liability currently Amortization of Discount
15.   No of shares subscribed when warrants are
payable = Taxable income × Tax 5--õñ-íîñ  1õéêöé1í(  íòüìêî  üý  óñ2î  
7.   Total Interest Expense (in case of exercised =
rate ôíõ  +í(ìñ  üý  í  (üî

•   Deferred tax liability = (carrying premium) = Periodic interest payments - × shares subscribed per lot
amount – tax base) × tax rate Amortization of Premium
16.   Carrying amount of the leased asset =
•   Deferred tax asset = (tax base –
8.   Amount of Bonds payable reported on the Initial recognition amount – Accumulated
carrying amount) × tax rate
balance sheet = Historical cost +/- depreciation
10.   Tax base of a liability = Carrying amount Cumulative amortization (or amortization
cost) 17.   Accumulated depreciation = Prior year’s
of the liability – Amounts that will be
accumulated depreciation + Current year’s
deductible for tax purposes in the future
9.   Amount of Bonds payable initially depreciation expense
reported on the balance sheet under IFRS =
Sales proceeds – Issuance costs
 FinQuiz Formula Sheet CFA Level I 2018

18.   Interest expense = Lease liability at the beg 2.   Forecast amount of profit for a given 11.   % of asset base that is being renewed
of the period × interest rate implicit in the period = Forecasted amount of sales × through new capital investment =
lease Forecast of the selected profit margin 6í1ñ7    
þõü))  ôô''  6í1ñ7

19.   Sales revenue = lower of the fair value of 3.   Retained CF (RCF) / Total debt =
12.   Adjusted BV = Total stockholders’ equity
the asset and PV of the min lease payments (ü1ñõíîéê-  6V  2ñýüõñ  _6  ö,íê-ñ)  –  óé+éóñêó))    
îüîí(  óñ2î – Goodwill
20.   Cost of sales = Carrying amount of the 4ñîíéêñó  6V/6í1  ñ71
4.   13.   Adjusted Price to BV ratio =
leased asset – PV of the estimated .üîí(  ðñ2î ôõéöñ   òíõ0ñî  öí1éîí(étíîéüê
unguaranteed residual value 5óqì)îñó  b\
21.   Interest Revenue = Lease receivable at the 5.   Inventory value adjusted to FIFO basis =
beg of the period × Interest rate End Inventory value under LIFO + End 14.   Tangible B.V = Total stockholders’ equity
LIFO reserve balance – Goodwill – Other intangible assets
22.   Net interest expense = Beg Net pension 15.   Price to tangible BV ratio =
ôõéöñ  
.íê-é2(ñ  b\
liability × Discount rate 6.   COGS adjusted to a FIFO basis = COGS
under LIFO – (End LIFO reserve – Beg
23.   Net Interest income = Beg Net Pension LIFO reserve) 16.   Adjusted debt-to-equity ratio =
4ñ1üõîñó  óñ2î'ô\  üý  ü1ñõíîéê-  (ñí)ñ
asset × Discount rate 4ñ1üõîñó  'Bìéîï
7.   Useful life of the company’s overall asset
24.   Reported pension expense = Pension costs 5ööìòì(íîñó  ðñ1    
base that has passed = 17.   Adjusted debt-to-asset ratio =
þõü))  ôô'
– Expected return on Pension plan assets 4ñ1üõîñó  óñ2î'ô\  üý  ü1ñõíîéê-  (ñí)ñ
25.   Funded Status = PV of the Defined benefit 4ñ1üõîñó  5))ñî'  ô\  üý  ü1ñõíîéê-  (ñí)ñ
8.   Avg age of the asset base = 18.   Adjusted Asset Turnover ratio =
obligations – Fair value of the plan assets 5ööìòì(íîñó  ðñ1    
*í(ñ)
5êêìí(  ðñ1  ñ71ñê)ñ
4ñ1üõîñó  5+-  îüîí(  í))ñî)'ô\  üý  ü1ñõíîéê-  (ñí)ñ  
Reading 32: Financial Reporting Quality
9.   Remaining useful life of the asset = 19.   PV of future operating lease payments =
3ñî  ôô'  (êñî  üý  íööìòì(íîñó  óñ1)    
ô\  üý  öí1éîí(  (ñí)ñ  1íïòñêî)
5êêìí(  óñ1  ñ71ñê)ñ × Total Future
Reading 33: Financial Statement Analysis: .üîí(  6í1éîí(  ^ñí)ñ  1íïòñêî)

Applications Operating Lease Payments

10.   Avg depreciable life of the assets at
þõü))  ôô'      
1.   Company’s sales = Projected market share installation = 20.   Interest expense = Interest × PV of the
5êêìí(  ðñ1  ñ71ñê)ñ
× Projected total industry sales lease payments
 FinQuiz Formula Sheet CFA Level I 2018

21.   Depreciation expense estimated on Reading 36: Cost of Capital 10.   Company’s stock returns = R éî = a +
straight-line basis = bR òî
ô\  üý  î,ñ  (ñí)ñ  1íïòñêî) 1.   WACC = wdrd (1 – t) + wprp + were
3ü  üý  ïõ)  üý  ýìîìõñ  (ñí)ñ  1íïòñêî)
11.   Unlevered β of Comparable Company =
2.   Debt-to-Equity Ratio conversion into „…,  †e‡fˆhˆz‰g
22.   Adjusted Interest Coverage ratio = β],  öüò1í = n†e‡fˆhˆz‰g
weight (i.e. Debt / (Debt + Equity) = &' &/î†e‡fˆhˆz‰g
  EBIT +  rent  exp ∗   −Dep  exp ∗ ngz{
|†e‡fˆhˆz‰g
|}~i{•
𝑖  payments + 𝑖  expense ∗     ngz{  
&'  
|}~i{• 12.   Levered β of Project =
* associated with the operating lease 𝐷R(O”
3.   Optimal Capital Budget is the point where 𝛽B,  R(O” = 𝛽Ý,  aO.R 1 + 1 − 𝑡R(O”
obligations 𝐸R(O”
MC of capital = Marginal return from
Reading 34: Corporate Governance & ESG: An investing Œ•Ž•ƒZ•
13.   𝛽H77IG = r
Introduction. &' &/G
‘
4.   After-tax cost of debt = Before-tax
Marginal Cost of Debt × (1 – firm’s i
14.   𝛽I}SMG` = 𝛽H77IG 1 + 1−𝑡
Reading 35: Capital Budgeting marginal tax rate) •

5.   Preferred Stock Price per Share 15.   Sovereign yield spread = Govt bond yield
1.   Incremental CF = CF with a decision - CF
ôõñý    *îüö0  ðé+  1ñõ  *,íõñ (denominated in developed country’s
without that decision =
6ü)î  üý  ôõñý  *îüö0 currency) – T.B yield on a similar maturity
2.   NPV = PV of cash inflows - IO =
bond in developed country
n
AT CFs at time t 6.   Expected Return on Stock I (under CAPM)
NPV = ∑ − IO = E (Ri) = RF + βi [E (RM) – RF]
t 16.   Country equity premium = Sovereign yield
t=1 (1+ Req RoR )
5êê  *.ð  üý  'Bìéîï  éêóñ7
7.   Expected Return on Stock I = E (Ri) = RF + spread ×   5êê  *.ð  üý  )ü+ñõñé-ê  2üêó  /0î  éê  
3.   Avg Accounting RoR (AAR) = βi1 (Factor risk premium)1 + βi2 (Factor îñõò)  üý  óñ+ñ(ü1ñó  ò0î  öìõõñêöï
5+-  3û  íýîñõ  óñ1  &  îí7ñ)   2ñýüõñ  éêîñõñ)î risk premium)2+…..+βij (Factor risk
5+-  b\  üý  ûê+)î
premium)j 17.   Cost of equity = Ke= RF + β[(E(RM)-RF) +
ô\  üý  ýìîìõñ  6V) 3ô\
4.   PI = =1+ CRP]
û; û;
ð%
8.   Cost of Equity = 𝐫𝐞 = +g
ôh
5.   Value of a company = Value of company’s 18.   Breakpoint =
5òüìêî  üý  öí1éîí(  íî  :,éö,  )üìõöñc )  öü)î  üý  öí1  ∆  
existing invst + Net PV of all of
9.   Expected Growth Rate of Dividends ôõü1  üý  êñ:  öí1  õíé)ñó  ýõüò  î,ñ  )üìõöñ
company’s future invst. ð
g = (1 - ) × ROE
'ô*
g = retention rate × ROE
 FinQuiz Formula Sheet CFA Level I 2018

19.   Cost of Capital (hen flotation costs are in %  ∆  éê  3ñî  ûêöüòñ 4.   Bond Equivalent Yield =
5.   DFL = or
ð% %  ∆  éê  ;1ñõíîéê-  ûêöüòñ Víöñ  +í(ìñ/ôìõö,í)ñ  1õéöñ
monetary terms = rñ = +g 6//  Vé7ñó  ;1  6ü)î   ×
ôh /V ôìõö,í)ñ    1õéöñ
6//Vé7ñó  ;1  6ü)î/Vé7ñó  Véê  6ü)î opu
3ü  üý  óíï)  îü  òíîìõéîï
20.   When FC are in terms of % of the share %  ∆  éê  3ñî  ûêöüòñ
ð% 6.   DTL= = DOL × DFL =
price: Cost of Equity = rñ = +g %  ∆  éê  3ü  üý  ]êéî)  *ü(ó
5.   Discount-basis Yield =
ôh /V 6/
6//Vé7ñó  ;1  6ü)î/Vé7ñó  Véê  6ü)î Víöñ  +í(ìñ/ôìõö,í)ñ  1õéöñ
×
Víöñ  \í(ìñ
21.   If FC are not tax deductible: NPV = PV of opf
Cash Inflows – IO – (FC in % × New 7.   Break-even Revenue = (Variable cost per 3ü  üý  óíï)  îü  òíîìõéîï
Equity Capital) unit × Break-even Number of Units) +
Fixed Operating costs + Fixed Financial 6.   Wght Avg collection period = wghts ×
22.   If FC are tax deductible: NPV = PV of Cost Avg no of days to collect accounts within
Cash Inflows – IO – [(FC in % × New each aging category
Equity Capital) × (1 – Marginal Tax Rate)] 8.   Breakeven Number of units = QBE =
Vé7ñó  ;1ñõíîéê-  6ü)î)'Vé7ñó  Véêíêöéí(  6ü)î)
Where, Weights = % of total receivables in
ôõéöñ  1ñõ  ìêéî/\íõéí2(ñ  öü)î  1ñõ  ìêéî
23.   Asset β = (Debt β × Proportion of Debt) + each category
(Equity β × Proportion of Equity)
9.   Operating Breakeven = QOBE = 5+-    ðíé(ï  V(üíî
!MŸIJ  URI(HGMLT  QO7G 7.   Float Factor = =
5+-  ðíé(ï  ðñ1ü)éî
Reading 37: Measures of Leverage $(MaI  RI(  SLMG/"H(MH|wI  aO7G  RI(  SLMG
5+-  ðíé(ï  V(üíî
’e{ˆ‰  “‡e~”{  eR  •–g†—j  ngfeji{gS
de  eR  nˆ•j
1.   Contribution Margin (CM) = (# of units Reading 38: Working Capital Management
sold) × [(price per unit) - (variable cost per
Where, Float =Amount of money that is in
unit)] 1.   Operating cycle = No of days of inventory
transit b/w payments (by customers) and
2.   Per unit CM = Price per unit - Variable + No of days of receivables
funds (usable by co)
cost per unit
2.   Net operating cycle = No of days of
8.   Value of stretching payment = A/c payable
3.   Operating income = CM – Fixed Operating inventory + No of days of receivables – No
× Co.'s opportunity cost for ST funds
Costs of days payables

%  ∆  éê  ;1ñõíîéê-  ûêöüòñ   'bû. 3.   Money Market Yield = 9.   Cost of Trade Credit = 1 +
4.   DOL =
%  ∆  éê  ]êéî)  *ü(ó Víöñ  +í(ìñ/ôìõö,í)ñ  1õéöñ klm
or × ðé)öüìêî ”
ôìõö,í)ñ    1õéöñ   −1
6/ &/ðé)öüìêî
opf
DOL= where n = days beyond discount period
6//  Vé7ñó  ;1ñõíîéê-  6ü)î 3ü  üý  óíï)  îü  òíîìõéîï
 FinQuiz Formula Sheet CFA Level I 2018

10.   Cost of Line of Credit = Reading 41: Portfolio Risk & Return: Part I 11.   Net R = Gross R - All managerial and
ûêîñõñ)î'6üòòéîòñêî  ýññ administrative exp
^üíê  5òüìêî
ûêîñõñ)î   1.   Total Return = Capital Gain (or Loss) +
11.   Bankers Acceptance Cost = = Dividend Yield 12.   After-tax nominal R = Total R - Any
3ñî  1õüöññó)  
ûêîñõñ)î   ô{ /ô{Ò% allowance for taxes on realized gains
^üíê  íòüìêî/ûêîñõñ)î
2.   Capital Gain =
ô{Ò%

13.   (1 + Nominal R) = (1 + Real Rf R) × (1 +

12.   Commercial Paper Cost = 3.   Dividend Yield =
ð’
−1
ûêîñõñ)î'ðñí(ñõc )  öüòòé))éüê'bíö0ì1  öü)î) ôh Inf) × (1 + RP)
^üíê  íòüìêî/ûêîñõñ)î 4.   3-Yr HPR = [(1 + R1) × (1 + R2) × (1 +
R3)]1/3 – 1 14.   (1 + Real R) = (1 + Real Rf R) × (1 + RP)
13.   Annualized cost = Cost × 12
(&'3üòéêí(  4)
5.   Arithmetic mean (AM) R = 𝑅M = 15.   (1 + Real R) =  
Nƒ% 'Nƒ‰ '⋯'Nƒ.˜Ò% 'Nƒ˜ & (&'ûêý)
Reading 39: Portfolio Management: An = *
G[& 𝑅MG ˜ ‰
* * NZ /ˆ
Overview 16.   Var of a Single Asset = 𝜎 k = ƒ„%
*

6.   Geometric R for n periods = R DM =

1.   NAV of bond mutual fund = & 17.   Sample Variance = s k =
’
i„% 4{ /4 ‰

(+í(ìñ  üý  ñíö,  2üêó  éê  î,ñ  1üõîýü(éü)

1 + 𝑅& 1 + 𝑅k … 1 + 𝑅L L −1 ./&

3ü  üý  ),íõñ)
. 6V  íî  .éòñ  î 18.   Cov of R b/w two assets = Cov (Ri,Rj) =
7.   IRR = î[f &'û44 { =0
2.   New Shares that need to be created = ρij× σi × σj
5òüìêî  îü  2ñ  ûê+ñ)îñó  éê  î,ñ  Vìêó
35\  üõ  .üîí(  +í(ìñ  üý  í  /ìîìí(  Vìêó 8.   Annual Return (Ann R):
19.   Portfolio Var = σkô = ω&k σ&k + ωkk σkk +
•   Ann R = (1 + Quarterly R) 4 – 1 2ω& ωk Cov R& , R k = ω&k σ&k + ωkk σkk +
3.   New NAV of the Fund = NAV or Total 12
•   Ann R = (1 + Monthly R) –1 2ω& ωk ρ&k σ& σk
value of a Mutual Fund + Amount to be 52
invested in the Fund •   Ann R = (1 + Weekly R) –1
365 20.   Portfolio S.D. = Portfolio  Variance
•   Ann R = (1 + Daily R) –1
4.   No of shares need to be retired = •   Weekly R = (1 + Daily R) 5 – 1
5òüìêî  îü  2ñ  :éî,óõí:ê  ýõüò  î,ñ  Vìêó 21.   Cov b/w asset 1 & asset 2 = Correlation of
35\  üõ  .üîí(  +í(ìñ  üý  í  /ìîìí(  Vìêó
•   Weekly R = (1 + Annual R) 1/52 – 1 Return b/w two assets × S.D. of asset 1 ×
S.D. of asset 2
Reading 40: Risk Management: An 9.   Portf R (for Two Assets) = (Wght of Asset
Introduction 1 × R of Asset 1) + (Wght of Asset 2 × R 22.   Correlation of Return b/w two assets =
of Asset 2) 6ü+íõéíêöñ  üý  4ñîìõê  2/:  î:ü  í))ñî)
*.ð.üý  í))ñî  &  ×  *.ð.üý  í))ñî  k

10.   Gross R = R – Trading exp – other exp

directly related to the generation of returns.
 FinQuiz Formula Sheet CFA Level I 2018

23.   1 + Expected Return =1 + E R = 2.   Total risk of for a well-diversified portfolio 14.   Weight of Non-market security should be
1 + rõý × 1 + E π × 1 + E RP = Systematic risk = βi×σm proportional to
5(1,í  üý  *ñöìõéîï  é
= α i / σ 2i
3üê)ï)îñòíîéö  +íõéíêöñ  üý  *ñöìõéîï  é
24.   Utility of an Invest = Expected Return - 3.   Multi-Factor Model: 𝐸 𝑅M − 𝑅P =
& {
 ×Risk  Aversion  Coefficient  × ”[& βM” 𝐸(𝐹” ) = βM( 𝐸 𝑅. − 𝑅P +
k 15.   Total Weight of Non-market security
{
”[k βM” 𝐸(𝐹” )
#
Var  of  Invest     should be proportional to = ƒ„% ¥ƒ ¦ƒ
# ¥‰ ™ ‰
4.   Single-Index Model: Ri – Rf = βi(Rm – Rf) ƒ„% ƒ ƒ
25.   Expected R of Portfolio = E R 1 = ω& R ý +
+ ei
1 − ω& E R é
5.   Factor weight associated with each factor = 16.   Information Ratio =
.üîí(  *ñöìõéîï  4é)0 5(1,í  üý  *ñöìõéîï  é
26.   Risk of Portfolio = σk1 = ω&k σký + .üîí(  /íõ0ñî  4é)0 3üê)ï)îñòíîéö  4é)0  üý  *ñöìõéîï  é
(1 − w& )k σké + 2ω& 1 − ω& ρ&k σý σé =
1 − ω& k σké & σp = (1 – w1) σi 6.   𝐸 𝑅R =   𝑅P   + 𝛽R 𝐸 𝑅. − 𝑅P =   17.   Expected Return of Portfolio (under
27.   Capital Allocation Line (CAL) = E R ô = = R ý + w& β& + wk βk E R ò − R ý Arbitrage Pricing Model) = E R 1 = R V +
' 4i /4R
Rý +
Ÿi
σô λ( β1,û + ⋯ + λ0 β1,0
7.   Asset’s Beta =
6üõõñ(íîéüê  2ñî:ññê  í))ñî  íêó  òíõ0ñî  ×*.ð.üý  5))ñî
28.   Portfolio Risk = ω&k σ&k + ωkk σkk + 18.   Return on an Asset in excess of 1-Month
*.ð.üý  /íõ0ñî
2ω& ωk Cov R& , R k 8.   Portfolio Beta = β1 = T-Bill Return (under four factor model) =
ê ê E R éî = αé + βé,/¨. MKTî +
é[& wé βé ; é[& wé =1
29.   In portfolio of many asset = βé,*/b SMBî + βé,r/^ HMLî + βé,]/ð UMDî
4f /4R
•   E R1 = 3
é[& ωé E Ré 9.   Sharpe Ratio =
Ÿf Reading 43: Basics of Portfolio Planning &
Ÿ‰ (3/&)
•   σkô = + Cov Construction
3 3
NÏ /N´
10.   Treynor Ratio =
Ÿ‰ (3/&) ŒÏ
•   σô = + ρσk ™b
1.   Investor’s Expected Utility from Portfolio
3 3
11.   M k = R $ − RP − 𝑅. − 𝑅P = Up = E (Rp) – λσ2p
™Ï

30.   New Asset should be included in the Portf

' 4”g /4R ' 4f /4R 12.   Jansen’s Alpha = 𝛼R = 𝑅R − 2.   Tactical Asset Allocation (TAA) Return
only if > ×ρêñ:,1
Ÿ”g Ÿf
𝑅P + 𝛽R 𝑅. − 𝑅P contribution = Actual return of the
portfolio – Return that would have been
Reading 42: Portfolio Risk & Return: Part II 13.   Security Characteristic Line (SCL) = R é − earned if the asset class weights were equal
R ý = αé + βé R ò − R ý to the policy weights
1.   Total Risk = Systematic risk +
Nonsystematic risk = β2i σ2m + σ2e
 FinQuiz Formula Sheet CFA Level I 2018

Reading 44: Market Organization & Structure

7.   Max leverage ratio for position financed by 6.   Total return of each security = TRi =
1.   Total return to a Leveraged Stock Purchase min margin requirement = P1i − P0i + Inci
4ñòíéêéê-  'Bìéîï/û;   &
=  where,
û; /éê  òíõ-éê  õñBìéõñòñêî P0i
Remaining Equity = IO – Purchase
commission + (-) Trading g(l) – Margin i Reading 45: Security Market Indices
N " P − P + Inci %
Total Return∑ wi $ 1i 0i '
paid + Div received – Sales commission i=1 # P0i &
paid OR 1.   Value of a price return index =
Remaining Equity = Proceeds on sale – N Over Multiple Time Periods:
Payoff loan – Margin i paid + Div received
– Sales commission paid
∑n P
i =1
i i 7.   Value of Price Return index at time t =
VPRI = VPRIT = VPRI0 (1 + PRI1) (1 + PRI2) … (1 +
D PRIT)
2.   ROE (based on leverage alone)
= Leverage (in times) × stock price return For Single Period: 8.   Value of Total Return index at time t =
(in %) 2.   % Change in value of Price return of VTRIT = V TRI0 (1 + TRI1) (1 + TRI2) … (1 +

3.   Price of stock below which a margin call

VPRI 1 − VPRI 0 TRIT)

will take place (P):

index Portfolio = PR I =
VPRI 0 9.   Weight of security i under price weighting
ûêéîéí(  òíõ-éê   $ '(ô/  ûêéîéí(  *îüö0  ôõéöñ)  
= =
ôõéöñ  üý  )ñöìõéîï  é    
ô
*ìò  üý  í((  1õéöñ)  üý  öüê)îéîìñêî  )ñöìõéîéñ)  
Maintenance  Margin  Requirement  (%)
3.   Price Return (Ind constituent security):PR I
10.   Weight of security i under equal weighting
4.   Total cost of placement to the issuing firm Pi1 − Pi 0 =
&
in IPO ($) = 3ü  üý  )ñöìõéîéñ)  éê  î,ñ  éêóñ7

= Gross proceeds received by the issuing Pi 0

firm – Net proceeds received by the issuing 11.   Weight of security i under market-cap
firm 4.   Price return of the index: PR I = weighting =
3f  üý  ),íõñ)  ü/)  üý  *é  ×  *,íõñ  1õéöñ  üý  *é
N
⎛ P − Pi 0 ⎞ d 3ü  üý  ),íõñ)  ü/)  üý  *é  ×  *,íõñ  1õéöñ  üý  *é
5.   Total cost of placement to the issuing firm ∑ wi ⎜⎜ i1 ⎟⎟ i

P Where Si = Security i
(þõü))  1õüöññó)  õñöñé+ñó  2ï  ûV/ i =1 ⎝ i0 ⎠
3ñî  1õüöññó)  õñöñé+ñó  2ï  ûV
in IPO (%) =
3ñî  1õüöññó)  õñöñé+ñó  2ï  ûV 12.   Weight of Si under Mkt Cap weighting =
where IF = Issuing firm 5.   % ∆in value of Total return of Index Võíöîéüê  üý  ),íõñ)  ü/)  ò0î  ý(üíî  ×  üý  ),íõñ)  *é  ×
*,íõñ  1õéöñ  üý  )ñöìõéîï  é
VPRI 1 − VPRI 0 + IncI (Võíöîéüê  üý  ),íõñ)  ü/)  /0î  ý(üíî  ×  üý  ),íõñ)  ü/)  üý  *é  ×
&ff% *,íõñ  1õéöñ  üý  )ñöìõéîï  é)
6.   Max leverage ratio = VPRI 0
%  üý  'Bìéîï
 FinQuiz Formula Sheet CFA Level I 2018

13.   Fundamental weight on security i = Reading 48: Introduction to Industry & D0 (1 + g ) D0 (1 + 0) D0

Vìêóíòñêîí(  )étñ  òñí)ìõñ  üý  öüò1íêï  é∗ Company Analysis V0 = = =
d(Vìêóíòñêîí(  )étñ  òñí)ìõñ  üý  öüò1íêï  é) r−g r −0 r
i

*Book value, cash flow, revenues, earnings, 9.   Value of a pref stock (non-callable, non-
Reading 49: Equity Valuation: Concepts & convertible) with maturity at time n =
dividends, & number of employees.
Basic Tools L
𝐷f 𝐹
𝑉f = +
Reading 46: Market Efficiency (1 + 𝑟)G 1+𝑟 L
1.   Value of a share of stock today = G/&
° '71ñöîñó  óé+éóñêó  éê  ïõ  î
î[& (&'õñBìéõñó  4;4  üê  )îüö0)^î
Gordon Growth Model:
Reading 47: Overview of equity Securities If an investor intends to buy and hold a share 10.   Value of a share of stock =
for 1 yr: D (1 + g ) D1
1.   Equity security’s Total Return = V0 = 0 = , g<r
r−g r−g
*í(ñ  ô  üý  í  ),íõñ/ôìõ,í)ñ  ôüý  í  ),íõñ'öí),/)îüö0  ðé+ 2.   Value of a share of stock today =
ôìõö,í)ñ  1õéöñ  üý  í  ),íõñ '71ñöîñó  ðé+  éê  &  ïõ  ''71ñöîñó  )ñ((éê-  1õéöñ  éê  &  ïñíõ
(&'õñB  4ü4  üê  )îüö0)^& 11.   Sustainable dividend growth rate =
2.   ROE in yr t = g = ROE × b
3û  (ýüõ  ;õóéêíõï  *,íõñ,ü(óñõ))  éê  ïõ  î 3.   Value of a share of stock for n holding where b = earnings retention rate = (1 -
5+-  .üîí(  b\  üý  'Bìéîï Dividend payout ratio)
period or investment horizon =
OR L '71ñöîñó  ðé+  éê  ïõ  î
3û  (ýüõ  ;õóéêíõï  *,íõñ,ü(óñõ))  éê  ïõ  î G[& &'õñB  4  üê  )îüö0 { +
ROE = Two-stage valuation model:
*,íõñ,ü(óñõ)c ñBìéîï  íî  2ñ-  üý  ïõ  î '71ñöîñó  1õéöñ  éê  ê  1ñõéüó)
  12.   Value of share today = V0 =
&'õñB  4  üê  )îüö0 ”
L
G
3.   MV of equity = Mkt price per share × 𝐷f 1 + 𝑔7 𝑉L
𝑉f = +
Shares O/s 4.   CFO = NI + Non-cash exp – Invst in WC (1 + 𝑟)G (1 + 𝑟)L
M[&
𝐷L'&
.üîí(  *rc ñBìéîï 5.   FCFE = CFO – FCInv + Net Borrowing 𝑉L =
4.   BV of equity per share = 𝑟 − 𝑔B
*,íõñ)  ü/)
𝐷L'& = 𝐷f (1 + 𝑔7 )L 1 + 𝑔B
6.   Value of a share for a non-div-paying
/íõ0ñî  1õéöñ  1ñõ  ),íõñ
5.   Price-to-book ratio = ° V6V'  éê  ïñíõ  î
b\  üý  ñBìéîï  1ñõ  ),íõñ stock = î[& &'õñB  4  üê  )îüö0 { ôf ð% /'% 1
13.   Justified P/E = = =
'&   õ/- õ/-

6.   ROE = Net profit margin × Asset turnover 7.   Req RoR on sharei = Current expected Rf
3ñî  ñíõêéê-) 14.   EV = MV of stock + MV of debt – Cash
× Financial leverage = × rate + Beta i [MRP]
3ñî  )í(ñ) and cash Equivalents
3ñî  )í(ñ) 5+-  îüîí(  í))ñî)  
×
5+-  îüîí(  í))ñî) 5+-  öüòòüê  ñBìéîï 8.   Value of a pref stock (non-callable, non-
15.   Asset-based value = Value of Equipment
convertible) =
and inventory – Value of Liabilities
 FinQuiz Formula Sheet CFA Level I 2018

Reading 50: Fixed Income Securities: Defining 3ñ:  1õéöñ/;(ó  1õéöñ 12.   Current yield =
4.   % Price change =
;(ó  1õéöñ *ìò  üý  öüì1üê  1íïòñêî)  õñöñé+ñó  ü+ñõ  î,ñ  ïñíõ
Elements
V(íî  1õéöñ
5.   Bond price (given sequence of spot rates)
1.   Inf adj Principal amount of a zero-coupon-
= PV = 13.   Price of Floating-rate note = PV=
indexed bond
= [Par value × (1 + CPI)] PMT PMT PMT + FV
1
+ 2
+... + (I + Qm) × FV (I + QM ) × FV (I + QM ) × FV
2.   Inf adj coupon payment for an interest- (1+ Z1 ) (1+ Z 2 ) (1+ Z N ) N m m m
+ FV
+ +... +
indexed bond " I + DM %
1
" I + DM %
2
" I + DM %
N

$1+ ' $1+ ' $1+ '

= [(coupon rate × Par value) × (1+CPI)] 6.   Full price of bond = Flat price of bond + # m & # m & # m &
3.   Inf adj Principal amount of a capital- Accrued interest
indexed bond 14.   Price of Money Market Instrument =
= [Par value × (1 + CPI)] G
7.   Accrued interest = AI   =   ×𝑃𝑀𝑇 # Days &
*   PV = FV × %1− × DR (
$ Year '
4.   Inflation adjusted coupon payment for a
8.   Full price of a fixed-rate bond between
capital-indexed bond
coupon payments = PVFull 15.   Market Discount Rate =
= [Par value × (1 + CPI)] × coupon rate
PMT PMT PMT + FV # FV − PV &
Reading 51: Fixed Income Markets: Issuance,
=
(1+ r)1−t/T
+
(1+ r) 2−t/T
+... +
(1+ r) N−t/T
DR = Year ( ×% )
Days $ FV ('
Trading & Funding
9.   Full price of a fixed-rate bond between
16.   Price of Money Market Instrument =
coupon payments
FV
Reading 52: Introduction to Fixed Income PV × (1+ r)t/T PV =
" Days %
Valuation $1+ × AOR '
10.   Interpolated yield (say for 3-year, given
# Yr &
1.   Amount of discount below par value = market discount rates for 2 and 5 yrs) =
Present value of deficiency o/k 17.   Add-on rate =
(Average yield for 2 year bonds) + ×
u/k ! Yr $ ! FV − PV $
2.   Present value of deficiency = (average yield for 5 year bonds – average AOR = # &×# &
ê 6üì1üê  õíîñ//íõ0ñî  óé)öüìêî  õíîñ ×ôíõ  +í(ìñ yield for 2 year bonds) " Days % " PV %
î[& &'/íõ0ñî  óé)öüìêî  õíîñ {
m
! APRm $ ! APRn $
n Relation b/w two spot rates and Implied
3.   Bond price = 11.   #1+ & = #1+ & Forward Rate:
PMT PMT PMT + FV " m % " n %
PV = + +... +
1
(1+ r) (1+ r) 2
(1+ r) N 18.   (1 + zA)A × (1 + IFRA,B-A)B-A = (1 + zB)B
 FinQuiz Formula Sheet CFA Level I 2018

Z-spread over the benchmark spot curve: FV of Reinvested Coupons = [CR×(1+

12
Price of a bond = 5.   CPR = 1 − (1 − SMM) RR)n-1] + [CR×(1+RR) n-2] +…+ [CR×(1+
PMT PMT PMT + FV RR)n-n]
PV = + +... +
(1+ z1 + Z)1 (1+ z2 + Z)2 (1+ zN + Z) N 6.   CF Construction (Monthly CF for MPS): Total Amount of Coupon Pmt = CR × Par
•   Net interest = (Beg mortgage value × No of periods
19.   OAS = Z-spread – Option value (bps per balance × Pass-through rate) / 12
year) •   Scheduled principal re-pmt = RR = Re-invstmnt rate per period
Mortgage pmt – Gross i- pmt CR = coupon rate
20.   G-spread = Yield-to-maturity on Corporate •   Gross i- pmt = (Beg mortgage
bond – Yield-to-maturity on a government balance × WAC) / 12 2.   Realized RoR on Bond=
%
bond •   Pre-pmt for month = SMM × *ìò  üý  4ñéê+ñ)îñó  6üì1üê)' m
4ñóñò1îéüê  üý  ôõéêöé1í(  íî  /íîìõéîï
(Beg mortgage balance for month −  1
büêó  ôõéöñ
21.   Interpolated Spread = I-spread = YTM of – Scheduled principal re-pmt for
the bond - Linearly interpolated yield to month)
the same maturity on an appropriate •   Total principal re-pmt = 3.   Carrying value of bond (if bond purchased
reference curve Scheduled principal re-pmt + below par) = Purchase price + Amortized
Prepayment amount of Discount
Reading 53: Introduction to Asset Backed •   Beg mortgage balance for the
Securities following month = Beg mortgage 4.   Carrying value of a bond (if bond
balance for the month – Total purchased above par) = Purchase price –
1.   Loan-to-value ratio (LTV) = Principal Pmt Amortized amount of Premium
5òüìêî  üý  /üõî-í-ñ
ôõü1ñõîï  \í(ìñ
•   Projected CF for MPS = Net i-
5.   Amortized amount for 1st year = Bond
pmt + Total principal re-pmt
Price after 1-yr - Initial bond price
2.   Monthly CF for a MPS = Monthly CF of
ôõü1ñõîï’)  íêêìí(  3;û
underlying pool of mortgages - Servicing 7.   DSC ratio =
ðñ2î  )ñõ+éöñ   6.   Capital g / (l) = Sale price of Bond after n
fee - Other fees years – Carrying value of Bond after n
Reading 54: Understanding Fixed Income Risk years
3.   Pass-through rate = Mortgage rate on the & Return
underlying pool of mortgages – Servicing
7.   Macaulay Duration =
Fee - Other fees 1.   Interest-on-interest gain from ( " PMT % " PMT % " PMT + FV %,
* $ 1−t/T ' $ 2−t/T ' $ N−t/T '*
* (1+ r ) ' + ( 2 − t / T )$ (1+ r ) ' +... + ( N − t / T )$ (1+ r ) '*-
compounding = Future value of reinvested MacDur = )(1− t / T )$
* $ PV Full ' $ PV Full ' $ PV Full '*
4.   SMM = Pre-pmt for month ÷ (Beg coupons - Total amount of coupon *+ $
#
'
&
$
#
'
&
$
#
'*
&.

mortgage balance for month – Scheduled payments OR

principal re-pmt for month) Where,
 FinQuiz Formula Sheet CFA Level I 2018

' + 17.   Money D = Annualized Mod D × Full

)1+ r 1+ r + #$ N × ( c − r )%& )
MacDur = ( − , − (t / T ) Bond Price 26.   Money Convexity of bond = Annual
c × #$(1+ r ) −1%& + r )
N
)* r - Convexity × Full Price
/íöðìõ
18.   ∆ Full price of Bond (in currency units) ≈ - 27.   Effective Convexity =
8.   Modified D = Money D × ∆ in annual YTM
&'õ #$( PV− ) + ( PV+ ) − [ 2 × (PV0 )]%&
2
9.   Annualized Modified D = (PV− ) − (PV+ ) (ΔCurve) × ( PV0 ))
/üóéýéñó  ðìõíîéüê 19.   PVBP =
ôñõéüóéöéï  üý  1íïòñêî  éê  í  ïñíõ 2
28.   Duration Gap = Bond’s Macaulay
10.   % Δ PV Full
= - AnnModDur × ΔYield 20.   Basis Point Value (BPV) = Money Duration – Investment Horizon
duration × 0.0001 (1 bp)
11.   Approx Modified D = Reading 55: Fundamentals of Credit Analysis

(PV− ) − (PV+ ) 21.   Bloomberg’s Risk Statistic = PVBP × 100

1.   Expected Loss = Default Probability ×
2 × (ΔYield) × (PV0 ) Full Loss Severity given Default
22.   %∆PV = (-AnnModDur × ∆Yield) +
&
 ×𝐴𝑛𝑛𝐶𝑜𝑛𝑣𝑒𝑥𝑖𝑡𝑦  ×(∆𝑌𝑖𝑒𝑙𝑑)k ;1ñõíîéê-  ûêöüòñ
12.   Approx Mac Dur = Approx Mod Dur × (1 k
2.   Operating Profit Margin =
4ñ+ñêìñ
+ r)
Or
%∆PV Full = (-AnnModDur × ∆Yield) + 3.   EBITDA = Operating Income + Dep +
(PV− ) − (PV+ ) & Amort
13.   Effective D =  ×𝐴𝑛𝑛𝐶𝑜𝑛𝑣𝑒𝑥𝑖𝑡𝑦  ×(∆𝑌𝑖𝑒𝑙𝑑)k
2 × (ΔCurve) × (PV0 ) k

4.   FCF = CFO – Cap exp– Div

1/G
14.   Macaulay D for a Zero-coupon bond = 23.   Approx. Convexity Adjustment =
* 5.   Capital expenditures = Additions to P&E +
(PV− ) + (PV+ ) −[2 × (PV0 )] Additions to product rights & intangibles –
15.   Macaulay D for a Perpetual bond = (1+ r) / (ΔYield)2 × (PV0 ) Proceeds of sale of P&E
r
24.   Convexity of a zero coupon bond =
16.   Avg Mod D for the Portf = 6.   Total debt = ST debt + Current portion of
Mod  D  of  Bond  1  ×  
/\  üý  büêó  & [ N − (t / T )] × [ N +1− (t / T )] LT debt + LT debt
.üîí(  /\üý  ôüõîý
/\  üý  büêó  k (1+ r)2
+ Mod  D  of  Bond  2  ×   +
.üîí(  /\  üý  ôüõîý 7.   Capital = Debt + Equity
/\  üý  büêó  3
…+ Mod  D  of  Bond  N  ×   25.   Money Convexity vs Money Duration =
.üîí(  /\  üý  ôüõîý
&
∆PV Full ≈ - (MoneyDur × ∆Yield) + [ ×
k
MoneyCon × (∆Yield)2]
 FinQuiz Formula Sheet CFA Level I 2018

8.   Yield on Corp Bond = Rf rate + Expected Reading 57: Basics of Derivative Pricing &
Inf rate + Maturity P + Liquidity P+ Credit 4.   Margin Call: Valuation
spread •   Long position: Price ↓ that would
'  (*.)
trigger a margin call = IM req – MM 1.   Pricing of risky assets = S0 =
&'õ'µ ’
9.   Yield spread = Liquidity P + Credit spread req
2.   Commodity = F 0, T = S0 e (r – δ)T
10.   Return impact for smaller spread ∆≈ % ∆ •   Short position: Price↑ that would
where, δ = Convenience yield − Cost of
in price ≈ -Modified Duration × ∆Spread trigger a margin call = IM req – MM
carry
req '  (*.)
11.   Return impact for larger spread ∆ ≈ % ∆ in 3.   S0 = –θ+γ
&'õ'µ ’
price ≈ - (Modified D × ∆Spread) + 5.   TED spread = LIBOR – T-Bill rate where, θ (theta) = PV of the costs and γ
&
Convexity × (∆Spread) 2 (gamma) = PV of benefits
k
6.   At expiration (for option Buyer):
.üîí(  )ñöìõñó  óñ2î •   Value of Call option = 4.   Arbitrage and Derivatives = Underlying
12.   Secured debt leverage =
'bû.ð5 CT = Max (0, ST - X) asset + Opposite position in derivative =
•   Profit from Call option = Underlying payoff – Derivative payoff =
13.   Senior unsecured leverage = Rf return
Max (0, ST - X) – C0
*ñöìõñó  óñ2î'*ñêéüõ  ìê)ñöìõñó  óñ2î
'bû.ð5 •   Value of Put option = P0 =
Max (0, X- ST) 5.   Pricing and Valuation of Forward
.üîí(  óñ2î
•   Profit from Put option = Contracts:
14.   Total Leverage =
'bû.ð5
Max (0, X- ST) – P0 •   At Expiration F (0, T) = S0 (1 + r) T or
S0 = F (0, T) / (1 + r) T
.üîí(  óñ2î/6í),
15.   Net Leverage = •   Value of forward (long) during
'bû.ð5 7.   At expiration (for option Seller):
•   Profit from Call option = contract life (where t < T) = Vt (0, T)
Reading 56: Derivatives Markets and – Max (0, ST - X) + C0 = St – F (0, T) / (1 + r) (T – t)
Instruments •   Profit from Put option = •   Value of forward (short) during
– Max (0, X- ST) + P0 contract life (where t < T ) = Vt
1.   Value of the contract to the ‘Long’ at (0, T) = F (0, T) / (1 + r) (T – t) - St
expiration = ST – F0(T) 8.   To eliminate arbitrage opportunity: •   Value of forward (long) at expiration
Forward Price should be = Spot Price (where t = T) = VT (0, T) = ST - F (0,
2.   Value of the contract to the ‘Short’ at ×   1 + 𝑖  𝑟𝑎𝑡𝑒  %   G T)
expiration = F0(T) – ST •   Value of forward (long) at initiation
(where t = 0) = Vt (0, T) = S0 – F (0,
3.   Margin % in stock market = T) / (1 + r) T = 0
/\  üý  *îüö0//\  üý  ðñ2î
/\  üý  *îüö0
 FinQuiz Formula Sheet CFA Level I 2018

•   Forward price of an asset with benefits
and/or costs = (S0 – γ + θ) (1 + r) T =
S0 (1 + r) T – (γ - θ) (1+ r) T
•   Value of Forward contract with
benefits and/or costs during the life of
the contract = St – (γ - θ) (1 + r) T - F
(T) / (1 + r) (T – t)
6.   FRAs: An example of 3 × 9 FRA (read as
three by nine):
•   Contract expires in 90 days
•   Underlying loan settled in 270 days
•   Underlying rate is 180-day LIBOR
•   For Synthetic FRA (take long position
in a 300-day Euro$ T.D and short
position in a 30-day Euro$ T.D
•   For synthetic forward position in a 90-
day zero-coupon that begins in 30 day
(buy 120 day & sell 30 day (zero
coupon bonds)
7.   Pricing and Valuation of Swap Contract (a
fixed for floating swap contract):
•   Fixed Periodic rate =
1 - ZN
RN =
Z1 + Z 2 +.... + Z N
•   Where Zn are n period zero coupon
bonds (i.e. $1 discount factors)
1 bond =
Zn =
1 + ( Ln × days / 360)
•   Value of a fixed rate side (per $1 NP)
= V fixed rate = [Fixed payment × (
Z1 + Z 2 +.... + Z N )] + ($1 × ZN)
•   Value of a floating rate side (per $ 1 •   Payoff at expiration (put out-of-the-
NP) = V floating rate = ($1 + 1st floating money) = ST.
pmt) × Z1 •   Payoff at expiration (put in-the-
money) = (X-ST) + ST = X.
Pricing and valuation of Options:
12.   Fiduciary Call
8.   Payoff of Call options:
•   Value FC = c0 + X / (1+r) T
•   At expiration call option = c T = Max •   Payoff at expiration (when call out-of-
(0, ST –X) the-money) = X.
•   Profit (call buyer) = Max (0, ST – X) – •   Payoff at expiration (call in-the-
c0 money) = X + (ST – X) = ST.
•   Profit (call seller) = -Max (0, ST – X)
+ c0 13.   Put-Call Parity (to avoid arbitrage) = c0 +
X / (1+r) T = p0 + S0
9.   Payoff of Put options:
•   Synthetic long position in a call =
•   p T = Max (0, X- ST) X
•   Profit (put buyer) = Max (0, X-ST) – p0 C = p 0 +S 0 −
(1+ r)T
•   Profit (put seller) = - Max (0, X – ST) +
p0 •   Synthetic long position in a put =
10.   Max Profit/Loss for Option writer/holder: X
p 0 = c 0 −S 0 +
(1+ r)T
•   Max profit of option seller/writer è •   Synthetic long position in an
Option premium.
X
•   Max loss of option seller/writer è underlying = S0 = c 0 + − p0
unlimited. (1+ r)T
•   Max loss of option holder èOption •   Synthetic long position in a riskless
premium X
= p 0 +S0 − c0
(1+ r)T
Put-Call Parity
14.   Put-Call-Forward Parity = F0(T) / (1 + r) T
11.   Protective Put
+ p0 = c0 + X/(1 + r) T
•   Value PP = p0 + S0
 FinQuiz Formula Sheet CFA Level I 2018

15.   Valuing a callable bond using Binomial 2.   Asset Based Valuation = Co value = Co’s = Return on the collateral + RP or
Model: assets value – Co’s liabilities value convenience yield net of storage costs.

•   Ru = Rd × e2σ 𝑡 Real Estate Valuation 10.   Sharpe ratio = (Investment return – Rf

•   Value at time 0 = V0 = hS0 − c0
•   Value at time 1 will either V1+ = hS1+ -
 NHGI
c1+ or V1- = hS1- - c1-
•   If the portfolio was hedged, then V+
would equal V-.
3.   Direct Cap Approach → Valuation of a return) / S.D. of return
1Ug
property = where
QHRMGHwM¶HGMOL
11.   Sortino Ratio = (Annualized RoR –
NOI = Gross potential income –Estimated
Annualized Rfe rate)/Downside Deviation
vacancy losses – Estimated collective
losses – Insurance – Property Taxes –
Utilities – Repairs, maintenance exp.

4.   Income Based Approach → FFO = NI +

Dep exp on R.E + Def Tax charges – Gains
from sales of R.E + losses from sale of R.E

5.   AFFO = FFO – Recurring Cap exp

6.   Asset based Approach → REIT’s NAV =

•   Value of the call =
Estimated MV of REIT’s total assets –
Value of REIT’s total liabilities.

7.   Pricing of Commodity Futures Contracts:

Futures price ≈ Spot price (1 +r) + Storage
costs – Convenience yield

•   Value of the put = 8.   Roll yield = Spot price of a commodity –

Futures contract price
or
Roll yield = Futures contract price with
Reading 58: Introduction to Alternative expiration date ‘X’– Futures contract price
Investments with expiration date ‘Y.

1.   Total Return = Alpha R + Beta R 9.   Returns on a passive investment in

commodity futures