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7/24/2019 CFA l 1 Formula Sheet December 2015
http://slidepdf.com/reader/full/cfa-l-1-formula-sheet-december-2015 1/31
7/24/2019 CFA l 1 Formula Sheet December 2015
http://slidepdf.com/reader/full/cfa-l-1-formula-sheet-december-2015 2/31
FinQuiz Formula Sheet CFA Level I 2015
• r MM = (r BD) !
!HbI "HxTI OQ GyI *(IH7T(a zMxx
$T(byH7I $(MbI
• r MM =
pqd (rs
pqd/ G (rs (Rule: r MM>
r BD
)
10. Bond Equivalent Yield = BEY =
Semiannual Yield ! 2
Reading 7: Statistical Concepts & Market
Returns
1. Range = Max Value – Min Value
2. Class Interval = i ={/B
| where
• i = class interval
•
H = highest value
• L = lowest value, k = No. of classes.
3. Absolute Frequency = Actual No of
Observations (obvs) in a given class
interval
4. Relative Frequency =K}7OxTGI !(I~TILba
*OGHx 1O OQ V}•7
5.
Cumulative Absolute Frequency = Add upthe Absolute Frequencies
6.
Cumulative Relative Frequency = Add up
the Relative Frequencies
7. Arithmetic Mean =FT. OQ O}•7 ML JHGH}H7I
1OPOQ O}•7 ML GyI JHGH}H7I
8. Median = Middle No (when observations
are arranged in ascending/descending
order)
•
For Even no of obvs locate
median at mean of
L
l and€L'l
l‚X9>:>X=9
• For Odd no. of obvs locate
median atL'&
l position
9.
Mode = obvs that occurs most frequently
in the distribution
10. Weighted Mean = ƒ„ 8 2M ƒMLM\& =
(w1X1+ w2X2+….+ wnXn)
11. Geometric Mean = GM = ƒ& ƒl m ƒLn
with Xi"0 for i = 1,2,…n.
12. Harmonic Mean = H.M = ƒ{ 8L
%
…†
n†‡%
13.
Population Mean = µ =ˆ†
n†
1 where N is the
number of observations in the entire
population and X i is the ith observation
14. Sample Mean = ƒ 8ˆ†
n†
L where n =
number of observation in the sample
15. Measures of Location:
• Quartiles =
hM7G(M}TGMOL
‰
• Quintiles =
hM7G(M}TGMOL
v
• Deciles =
hM7G(M}TGMOL
&d,
• Position of a percentile = Ly =
= , + a
&dd
16.
Mean Absolute Deviation = MAD =
[̂/ˆn†‡%
L
17. Population Var = !2 =
ˆ†/Š ‹#†‡%
1
18. Population S.D = Œl=ˆ†/Š ‹#
†‡%
1
19. Sample Var = s2 =ˆ†/ˆ ‹n
†‡%
L/&
20.
Sample S.D = s = ˆ†/ˆ ‹n
†‡%L/&
21. Semi-var =ˆ†/ˆ ‹
L/&!O( Hxx ˆ†ˆ
22.
Semi-deviation (Semi S.D) =
94Ž>;5>;=Y4 =ˆ†/ˆ ‹
L/&!O( Hxx ˆ†ˆ
23. Target Semi-var =ˆ†/z ‹
L/&!O( Hxx ̂ †z
where B = Target Value
24. Target Semi-Deviation =
:;54: 94Ž>;5>;=Y4 =
ˆ†/z ‹
L/&!O( Hxx ˆ†z
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FinQuiz Formula Sheet CFA Level I 2015
25. Coefficient of Variation = CV =F
ˆ
where s= sample S.D and ƒ = sample
mean
26.
Sharpe Ratio = )IHL $O(GQOxMO N/)IHL NQ NFPh OQ $O(GQOxMO N
27.
Excess Kurtosis = Kurtosis – 3
28. Geometric Mean R #
‘5>:3Ž4:>Y ]4;= Z ?"H(MHLbI OQ N
l
Reading 8: Probability Concepts
1.
Empirical Prob of an event E = P(E) =$(O} OQ I•ILG ’
*OGHx $(O}
2. Odds for event E =$(O} OQ ’
&/$(O} OQ ’
3. Odds against event E =&/$(O} OQ ’
$(O} OQ ’
4. Conditional Prob of A given that B has
occurred = P(A“B) =$ Kz
$ z" P(B) $ 0.
5. Multiplication Rule (Joint probability that
both events will happen):
P(A and B) = P(AB) = P(A“B) ! P(B)
P(B and A) = P(BA) = P(B“A) ! P(A)
6. Addition Rule (Prob that event A or B will
occur):
P(A or B) = P(A) + P(B) – P(AB)
P(A or B) = P(A) + P(B) (when events are
mutually exclusive because P(AB) = 0)
7.
Independent Events:
• Two events are independent if:
P(B“A) = P(B) or if P(A“B) =
P(A)
• Multiplication Rule for two
independent events = P(A & B) =
P(AB) = P(A)! P(B)
• Multiplication Rule for three
independent events = P(A and B
and C) = P(ABC) = P(A) ! P(B)
! P(C)
8.
Complement Rule (for an event S) = P(S)
+ P(SC) = 1 (where S
C is the event not S)
9.
Total Probability Rule:
P(A) = P(AS) + P(ASC) = P(A“S)!P(S) +
P(A“SC)!P(SC)
P(A) = P(AS1) + P(AS2) +….+ P(ASn) =
P(A“S1)!P(S1) + P(A“S2)!P(S2)… +
P(A“Sn)!P(Sn)
(where S1, S2, …,Sn are mutually exclusive
and exhaustive scenarios)
10. Expected R = E(wiR i) = wiE(R i)
11. Cov (R i R j) = ” ZM ? ”ZM Z ? ”Z
Cov (R i R j) = Cov (R j R i)
Cov (R, R) = !2 (R)
12. Portfolio Var = !2 (R p) =
2M2iX ZMZL\&
LM\&
!2 (R p) = 2&
lŒl Z& + 2llŒl Zl +
2pl
Œl
Zp + 22&2liX Z&– Zl +22&2piX Z&– Zp +
22l2piX Zl– Zp
13.
Standard Deviation (S.D) = Œl Z$
14. Correlation (b/w two random variables R i,
R j) = — ZMZ 8 RO• N†N˜
™N†0™N˜
15.
Bayes’ Formula =
@ ”4=:“š42 ›=eX5Ž;:>X= 8
$ 1I„ fLQO(.HGMOL“’•ILG
$ 1I„ fLQO(.HGMOL 0
@ @5>X5 ‚5XœP Xe ”4=:
16. Multiplication Rule of Counting = n
factorial = = = n (n-1)(n-2)(n-3)…1.
17. Multinomial Formula (General formula for
labeling problem) = L
L%L‹mLž
18.
Combination Formula (Binomial Formula)
= i(L =
L
( =
L
L/( (
where n = total no. of objects and r = no.
of objects selected.
19. Permutation = @(L =
L
L/(
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FinQuiz Formula Sheet CFA Level I 2015
Reading 9: Common Probability Distributions
1. Probability Function (for a binomial
random variable) p(x) = p(X=x) =L
Ÿ ‚
Ÿ
+ ? ‚
L/Ÿ
= 8
L
L/Ÿ Ÿ ‚
Ÿ
+ ?‚ L/Ÿ (for x = 0,1,2….n)
• x = success out of n trials
• n-x = failures out of n trials
•
p = probability of success
• 1-p = probability of failure
• n = no of trials.
2. Probability Density Function (pdf) = f(x)
=&
}/H
k X:3452>94
eX5 ; ¡ œ =
F(x) =Ÿ/H
}/H eX5 ; ¢ ¡ ¢ œ(cumulative
distribution)
3. Normal Density Funct = e ¡ 8&
™ l£4¡‚
/€Ÿ/Š‹
l™‹ ¤¥¦ ? § ¢ ¡ ¢ , §
4. Estimations by using Normal Distribution:
•
Approximately 50% of all obsv fall in
the interval ¨ ©l
pŒ
• Approx 68% of all obvs fall in the
interval ¨ © Œ
• Approx 95% of all obvs fall in the
interval ¨ ©ªŒ
• Approx 99% of all obvs fall in the
interval ¨ ©«Œ
• More precise intervals for 95% of the
obvs are ¨ © +P¬Œ and for 99% of the
observations are ¨ © ªP®¯ŒP
5. Z-Score (how many S.Ds away from the
mean the point x lies) ° 8
9:;=<;5< =X5Ž;± 5;=<XŽ ;5>;œ±4 8
ˆ/Š
™ (when X is normally distributed)
6. Roy’s Safety-Frist Criterion = SF Ratio =’ NE /N²
™E
7. Sharpe Ratio = =’ NE /N³
™E
8. Value at Risk = VAR = Minimum $ loss
expected over a specified period at a
specified prob level.
9. Mean (µL) of a lognormal random variable
= exp (µ + 0.50%2)
10. Variance (%L2) of a lognormal random
variable = exp (2µ+ %2) ! [exp (%2) – 1].
11.
Lognormal Price = ST = S0exp (r 0,T)
Where, exp = e and r 0,t = Continuously
compounded return from 0 to T
12. Price relative = End price / Beg price =
St+1/ St=1 + R t, t+1
where,
Rt, t+1 = holding period return on the stock
from t to t + 1.
13. Continuously compounded return
associated with a holding period from t to t
+ 1:
r t, t+1= ln(1 + holding period return) or
r t, t+1 = ln(price relative) = ln (S t+1 / St) = ln
(1 + R t,t+1)
14. Continuously compounded return
associated with a holding period from 0 to
T:
r 0,T= ln (ST / S0) or 5d–* 8 5*/&–* ,5*/l–*/& , ´ , 5d–&
Where,
r T-I, T = One-period continuously
compounded return
15. When one-period continuously
compounded returns (i.e. r 0,1) are IID
random variables.
” 5d–* 8 ” 5*/&–* , ” 5*/l–*/& ,
´ , ” 5d–& 8 ¨ ̂And
A;5>;=Y4 8 Œl 5d–* 8 Œ l^
S.D. = % (r 0,T) = % ^
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FinQuiz Formula Sheet CFA Level I 2015
16. Annualized volatility = sample S.D. of
one period continuously compounded
returns ! ^
Reading 10: Sampling and Estimation
1.
Var of the distribution of the sample mean
=™‹
L
2. S.D of the distribution of the sample mean
=™‹
L
3. Standard Error of the sample mean:
• When the population S.D (!) is known
= Œˆ 8
™
L • When the population S.D (!) is not
known = 9ˆ 87
L where s = sample
S.D estimate = 9;Ž‚±4 ;5>;=Y4 8
9l 23454 9l =ˆ†/ˆ ‹n
†‡%
L/&
4. Finite Population Correction Factor = fpc
=1/L
1/& where N= population size
5.
New Adjusted Estimate of Standard Error
= (Old estimated standard error ! fpc)
6.
Construction of Confidence Interval (CI) =
Point estimate ± (Reliability factor !
Standard error)
• CI for normally distributed population
with known variance = ƒ © °Hwl™
L
• CI for normally distributed population
with unknown variance = ƒ © °HwlF
L
where S = sample S.D.
7. Student’s t distribution
µ = ƒ © :HwlF
L
8. Z-ratio =n
X z
!
µ "
=
9. t-ratio =
n s
X t
µ !
=
Reading 11: Hypothesis Testing
1. Test Statistic =µ¶·¸¹ºµ»¶»¼½»¼¾ / ¿À¸Á»Âº½¼ÃºÄŶ¹ÆºÁǸÁ¸ ¶̧ȶ·º»ºÈ
½»¶ÉĶÈĺÈÈÁÈÁǽ¶·¸¹º½»¶»¼½»¼¾ Ê
*when Pop S.D is unknown, the standard
error of sample statistic is given by ˈ 8
F
L
*when Pop S.D is known, the standard
error of sample statistic is given by Œˆ 8
™
L
2. Power of Test = 1-Prob of Type II Error
3. ° 8ˆ/Šg
Ì
n
(when sample size is large or
small but pop S.D is known)
4. ° 8
ˆ/Šg
-n (when sample size is large but
pop S.D is unknown where s is sample
S.D)
5. :L/& 8ˆ/Šg
-
n
(when sample size is large or
small and pop S.D is unknown and
popsampled is normally or approximately
normally distributed)
6. Test Statistic for a test of diff b/wtwo pop
means (normally distributed, pop var
unknown but assumed equal)
t =ˆ%/ ‹̂ / Š%/Š‹
Í΋
n%'
Í΋
n‹
%w‹ where ËSl = pooled
estimator of common variance =
L%/& F%‹' L‹/& F‹
‹
L%' L‹/l where <e 8 =& , =l ?
ª.
7. Test Statistic for a test of diff b/w two pop
means (normally distributed, unequal and
unknown pop var)
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FinQuiz Formula Sheet CFA Level I 2015
t =ˆ%/ ‹̂ / Š%/Š‹
Í%‹
n%'
Í‹‹
n‹
%w‹ In this df calculated as
<e 8
Í%‹
n% '
Í‹‹
n‹
‹
Í%
‹
n%
‹
n%'
Í‹
‹
n‹
‹
n‹
8. Test Statistic for a test of mean differences
(normally distributed populations,
unknown population variances)
•
: 8J/ŠÏg
FJ
• sample mean difference = < 8
&
L<M
LM\&
• sample variance = ËJ
l 8J†/J ‹n
†‡%
L/&
• sample S.D = ËJ
l
• sample error of the sample mean
difference = 9J
8FÏ
L
8. Chi Square Test Statistic (for test
concerning the value of a normal
population’s variance) ! l
8 L/& 7‹
™g‹
where = ?+ 8 <e ;=< 9l
89;Ž‚±4 ;5>;=Y4 8
ˆ†/ˆ ‹n†‡%
L/&
9. Chi Square Confidence Interval for
variance
Lower limit = L =L/& F‹
! Ðw‹
‹ and Upper limit
= U =L/& F‹
! %ÑÐw‹
‹
10. F-test (test concerning differences between
variances of two normally distributed
populations) F =F%
‹
F‹‹
Ë&l 8 +9: 9;Ž‚±4 ;5 2>:3 =& Xœ9 Ò Ë&
l
8 ª=< 9;Ž‚±4 ;5 2>:3 =l Xœ9
<e& 8 =& ? + =ÓŽ45;:X5 <e
<el 8 =l ? + <4=XŽ>=;:X5 <e
11. Relation between chi-square and F-
distribution = j 8ˆ%
‹
.
ˆ‹‹
L
where:
•
ƒ&l is one chi-square random variable
with one m degrees of freedom
•
ƒll is another chi-square random
variable with one n degrees of
freedom
12. Spearman Rank Correlation = 57
8 + ? <M
lLM\&
= =l ? +
• For small samples rejection points for
the test based on 57are found using
table.
• For large sample size (e.g. n>30) t-test
can be used to test the hypothesis i.e.
: 8= ? ª &wl57
+ ? 57l &wl
Reading 12: Technical Analysis
1. Relative Strength Analysis =Ôȼ¾ºÁǶ½½º»
Ôȼ¾ºÁǻºպɾ·¶ÈÖ×½½º»
2. Price Target for the
•
Head and Shoulders = Neckline –
(Head – Neckline)
• Inverse Head and Shoulders =
Neckline + (Neckline– Head)
3.
Simple Moving Average =ÔØ'ÔÙ'ÔÚmP'ÔÉ
Û
4.
Momentum Oscillator (or Rate of ChangeOscillator ROC):
• Momentum Oscillator Value M = (V-
Vx) 0+kk
(where V = most recent closing price
and Vx = closing price x days ago)
• Alternate Method to calculate M ="
"Ü0+kk
5.
Relative Strength Index = RSI = +kk ?
&dd
&'NF where
RS =ÝS byHLUI7 JT(MLU bOL7MJI(IJ SI(MOJ
hO„L byHLUI7 JT(MLU bOL7MJI(IJ SI(MOJ
6.
Stochastic Oscillator (composed of two
lines - %K and %D):
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FinQuiz Formula Sheet CFA Level I 2015
•
Þß 8 +kkR/B&‰
{&‰/B&‰ where:
C = latest closing price, L14 = lowest
price in last 14 days, H14 is highest
price in last 14 days
•
% D = Average of the last three % K values calculated daily.
7. Put/Call Ratio (Type of Sentiment
Indicators) =ÅÁ¹Æ·ºÁÇÔƻ฻¼ÁɽáȶĺÄ
ÅÁ¹Æ·ºÁÇⶹ¹à¸»¼ÁɽáȶĺÄ
8. Short Interest Ratio (Type of Sentiment
Indicators) =µÂÁÈ»ãÉ»ºÈº½»
×äºÈ¶åºæ¶¼¹ÀáȶļÉåÅÁ¹Æ·º
9. Arms Index or TRIN i.e. Trading Index
(Type of Flow of funds Indicator) =
‘5Ž ›=<4¡ X5 ^Z›š 8
1OPOQ KJ•HL f77TI7 ç1OPOQ hIbxML f77TI7
"OxT.I OQ KJ•HL f77TI7ç"OxT.I OQ hIbxML f77TI7
Reading 13: Demand & Supply Analysis:
Introduction
1.
Slope of the demand curve =è éê ëìéíî
è éê ïðñêòéòó ôîõñêöîö
2. Slope of the supply curve =è éê ëìéíî
è éê ïðñêòéòó ÷ðøøùéîö
3. Consumer Surplus = Value that a
consumer places on units consumed –
Price paid to buy those units
• Area (for calculating Consumer
Surplus) = & (Base ! Height) = & [Qd
! (Price intercept – P1)]
4. Producer Surplus = Total revenue received
from selling a given amount of a good –
Total variable cost of producing that
amount
•
Total revenue = Total quantity sold !
Price per unit
• Area (for calculating Producer
Surplus) = & (Base ! Height) = &
{(Q0) ! (P0 – intercept point on y-
axis**)}
**where supply curve intersects y-axis
5.
Total Surplus = Consumer surplus +
Producer surplus
6.
Total Surplus = Total value to buyers –
Total variable cost
7. Society Welfare =Consumer surplus +
Producer surplus
8.
Own-Price Elasticity of Demand =
!!"
#$$%
&!!"
#$$%
&
'
'=
'
'=
xd
x
x
xd
x
xd
pd
Q
P
P
Q
P
Q E
x
%
%
9. Arc Elasticity of Demand =Þ è éê ïðñêòéòó ôîõñêöîö
Þ è éê ëìéíî
)(
)(
P%
Q%
2121
12
2121
12
P P
P P
+
!
+
!
="
"
10. Income Elasticity of Demand =Þ è éê ïðñêòéòó ôîõñêöîö
Þ è éê úêíûõî=
I
I
Q
Q
xd
xd
x
!
!
=
!
!
I%
Q% d
11. Cross Elasticity =Þ èéê ïðñêòéòó ôîõñêöîö ûü ýûûö þ
Þ è éê ëìéíî ûü ýûûö ÿ
Reading 14: Demand & Supply Analysis:
Consumer Demand
1. Marginal Utility =è éê !ûòñù "òéùéòó
è éê ïðñêòéòó #ûê$ðõîö
2.
Equation of Budget Constraint Line = (PX
! QX) + (PY ! QY)
3. Slope of Budget Constraint Line = ?ë…
ë%,
where X and Y is measured on the
horizontal and vertical axis, respectively.
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FinQuiz Formula Sheet CFA Level I 2015
4. Marginal Rate of Substitution =è éê ï%
è éê ï…=
&ñì'éêñù "òéùéòó ûü ýûûö þ
&ñì'éêñù "òéùéòó ûü ýûûö ÿ
Reading 15: Demand & Supply Analysis: The
Firm
1. Profit = Total revenue – Total cost
2.
Accounting Profit = Total Revenue –
Explicit Costs(or Accounting costs)
3. Economic Profit
• = Total Revenue – Explicit Costs –
Implicit Costs or
•
= Accounting Profit – Implicit Costsor
•
= Total Revenue – Total Economic
Costs
4. Economic costs = Explicit costs + Implicit
costs
5.
Normal Profit = Accounting Profit –
Economic Profit
6.
Accounting profit = Economic Profit + Normal Profit
7. Economic rent = (New “Higher” Price
after ( in Demand – Previous Price before
( in Demand) ! QS before ( in Demand
8.
Total Revenue (TR):
• = Price ! Quantity or
• = Sum of individual units sold !
Respective prices of individual Units
sold = ' (Pi ! Qi)
9.
Average Revenue (AR) =
!ûòñù )î*îêðî
ïðñêòéòó
10. Marginal Revenue (MR) =è éê !ûòñù )î*îêðî
è éê ïðñêòéòó
11. Total Variable Cost = Variable Cost per
unit ! Quantity Produced
12.
Total Cost = Total Fixed + Total Variable
13. Average total cost (ATC) =
!ûòñù #û$òïðñêòéòó ëìûöðíîö
= Avg. Fixed Cost + Avg.
Variable Cost
14. Marginal cost (MC) =è éê !ûòñù #û$ò
è éê ïðñêòéòó ëìûöðíîö
15. Marginal Variable Cost =è éê !ûòñù +ñìéñ,ùî #û$ò
è éê ïðñêòéòó ëìûöðíîö
16.
Marginal revenue (in perfect competition)
= Avg. Revenue = Price regardless of
Demand
17. Profit can be increased by increasing
output when MR> MC
18. Profit can be increased by decreasing
output when MR< MC
19. Break-even price: P = ATC ! Output
level where Price = Average Revenue =
Marginal Revenue = Average Total Cost
! where, Total Revenue = Total Cost.
20.
Firms earn Economic Profits when Price >
Average Total Cost
21. Profits occur when Total Revenue (TR) "
Total Cost (TC) & when Price = Marginal
revenue! firm will continue operating.
22. Losses are incurred when there are
Operating profits (Total Revenue "
Variable Cost) but Total Revenue < Total
Fixed Cost + Total Variable Cost ANDwhen Price = Marginal Revenue while
losses are < fixed costs! firm will
continue operating.
23. Losses are incurred when there are
Operating losses (Total Revenue <
Variable Cost) AND when losses=
fixed costs! firm will shut down.
24.
Average Product =
!ûòñù ëìûöðíò
ïðñêòéòó ûü -ñ,ûì
25. Marginal Product =è éê !ûòñù ëìûöðíò
è éê ïðñêéòó ûü -ñ,ûì =
è éê !ûòñù .ðòøðò
è éê /û ûü 0ûì1îì$
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FinQuiz Formula Sheet CFA Level I 2015
26. Least-cost optimization Rule:&ñì'éêñù ëìûöðíò ûü -ñ,ûì
ëìéíî ûü -ñ,ûì8
&ñì'éêñù ëìûöðíò ûü ë2ó$éíñù #ñøéòñù
ëìéíî ûü ë2óéíñù #ñøéòñù
27.
Profit is maximized when: MRP = Price or
cost of the input for each type of resource
that is used in the production process
28. Marginal Revenue product = Marginal
Product of an input unit ! Price of the
Product = Value of the input to firm =è éê !ûòñù )î*îêðî
è éê ïðñêòéòó ûü úêøðò îõøùûóîö
29. Surplus value or contribution of an input to
firm’s profit = MRP – Cost of an input
Reading 16: The Firm & Market Structures
1. In perfect competition, Marginal revenue =
Avg. Revenue = Price regardless of level
of Demand
2. Marginal Revenue = 3¦456 0 + ?
&
ëìéíî 7ùñ$òéíéòó ûü ôîõñêö 3. Concentration Ratio =
÷ðõ ûü $ñùî$ *ñùðî$ ûü ò2î ùñì'î$ò / üéìõ$
!ûòñù &ñì1îò ÷ñùî$
4.
Herfindahl-Hirshman Index = Sum of the
squares of the market shares of the top N
companies in an industry
Reading 17: Aggregate Output, Prices &
Economic Growth
1. Nominal GDP t = Prices in year t !
Quantity produced in year t
2. Real GDP t = Prices in the base year !
Quantity produced in year t
3. Implicit price deflator for GDP or GDP
deflator =*ñùðî ûü íðììîêò óì ûðòøðò ñò íðììîêò óì øìéíî$
*ñùðî ûü íðììîêò óì ûðòøðò ñò ,ñ$î óì øìéíî$ !
100
4. Real GDP = [Nominal GDP / (GDP
deflator ÷ 100)]
5. GDP deflator =/ûõéêñù ýôë
)îñù ýôë0+kk
6. GDP = Consumer spending on final good
&services + Gross private domestic invst +
Govt. spending on final goods &services +
Govt. gross fixed invst + Exp – Imp +
Statistical discrepancy
7.
Net Taxes = Taxes – Transfer payments
8.
GDP = National income + Capital
consumption allowance + Statistical
discrepancy
9. National Income = Compensation of
employees + Corp & Govt enterprise
profits before taxes + Interest income +
unincorporated business net income + rent
+ indirect business taxes less subsidies
10. Total Amount Earned by Capital = Profit +
Capital Consumption Allowance
11. PI = National income – Indirect business
taxes – Corp income taxes – Undistributed
Corp profits + Transfer payments
12. Personal disposable income (PDI) =
Personal income – Personal taxes OR GDP
(Y) + Transfer payments (F) – (R/E +
Depreciation) – direct and indirect taxes
(R)
13. Business Saving = R/E + Depreciation
14. Household saving = PDI - Consumption
expenditures - Interest paid by consumers
to business - Personal transfer payments to
foreigners
15.
Business sector saving = Undistributed
corporate profits + Capital consumption
allowance
16. Total Expenditure = Household
consumption (C) + Investments (I) +
Government spending (G) + Net exports
(X-M)
17. Private Sector Saving = Household Saving
+ Undistributed Corporate Profits +
Capital Consumption Allowance
7/24/2019 CFA l 1 Formula Sheet December 2015
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FinQuiz Formula Sheet CFA Level I 2015
18. GDP = Household consumption + Private
Sector Saving + Net Taxes
19. Domestic saving = Investment + Fiscal
balance + Trade balance
20. Trade Balance = Exports – Imports
21. Fiscal balance = Government Expenditure
– Taxes = (Savings – Investment) – Trade
Balance
22. Average propensity to consume (APC) =8''ìî'ñòî #ûê$ðõøòéûê
)îñù úêíûõî
23. Quantity theory of money equation:
Nominal Money Supply ! Velocity of
Money = Price Level ! Real Income or
Expenditure
24. % è in unit labor cost = % è in nominal
wages - % è in productivity
25. Economic growth = Annual % è in real
GDP
26.
Total Factor Productivity growth = Growthin potential GDP – [Relative share of labor
in National Income ! (Growth in labor) +
[Relative share of capital in National
Income ! (Growth in capital)]
27. Growth in potential GDP = Growth in
technology + (Relative share of labor in
National Income ! Growth in Labor) +
(Relative share of capital in National
Income ! Growth in capital]
28. Capital share =Corporate profits + net
interest income + net rental income +
(depreciation/ GDP)
29.
Labor share =7õøùûóîî #ûõøîê$ñòéûê
ýôë
Reading 18: Understanding Business Cycles
1. Price index at time t2 ="HxTI OQ GyI RO.7T.SGMOL zH7|IG HG G‹
"HxTI OQ GyI ROL7T.SGMOL zH7|IG HG G%0+kk
Inflation Rate =ëìéíî úêöî9 ñò òéõî ò‹
&dd? +
2. Fisher Index = ›‚ 0›: (where, IL =
Laspeyres index and I p = Paasche Index)
3.
;=>: ±;œX5 YX9: €;:i >=<>Y;:X5 8!ûòñù ùñ,ûì íûõøîê$ñòéûê øîì 2ûðì øîì <ûì1îì
.ðòøðò øîì 2ûðì øîì <ûì1îì
4. =6>¥54?@ ¥¤ A¥B6@ 8/ûõéêñù ýôë
&ûêîó ÷ðøøùó
Reading 19: Monetary & Fiscal Policy
1. Total Money created = New deposit/
Reserve Req
2. Money Multiplier =&
)î$îì*î )îC ûì ìî$îì*î ìñòéû
3. Narrow money = M1= notes and coins in
circulation + other very highly liquid
deposits
4.
Broad money = M2 = M1 + entire range of
liquid assets available to make purchases
5. M3 = M2 + other liquid assets
6. Quantity Theory of Money = M ! V = P !
Y where,
M = Quantity of money
V = Velocity of circulation of money
P = Average price level
Y = Real output
7. Neutral Rate = Trend Growth + Inflation
Target
8.
Impact of Taxes and Government
Spending: The Fiscal Multiplier
The net impact of the government sector
on AD:
•
G – T + B = Budget surplus or Budget
deficit
where, G = government spending , T
=taxes, B =transfer benefits
• Disposable income = National Income
– Net taxes = (1 – t) National Income
where, Net taxes = taxes – transfer
payments, t = net tax rate
9.
Fiscal Multiplier (in the absence of taxes)
= 1/(1 - MPC)
• MPS = 1 – MPC.
7/24/2019 CFA l 1 Formula Sheet December 2015
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FinQuiz Formula Sheet CFA Level I 2015
• Total increase in income and spending
= Fiscal multiplier ! G
10.
Fiscal Multiplier (in the presence of taxes)
•
MPC (with taxes) = MPC ! (1 - t)
• Fiscal multiplier =
&
&/)$R &/G
• Total ( in income and spending =
Fiscal multiplier ! G
• Initial ( in consumption due to
reduction in taxes = MPC ! tax cut
amount
• Total or cumulative effect of tax cut =
multiplier ! initial change in
consumption
11. Cumulative multiplier =íðõðùñòé*î îüüîíò ûê ìîñù ýôë û*îì ò2î ò<û óîñì$
Þ OQ Dh$
Reading 20: International Trade & Capital
Flows
1.
Terms of trade =ëìéíî ûü î9øûìò$
ëìéíî ûü éõøûìò$
2.
Terms of Trade (as an index number) =8*' øìéíî ûü î9øûìò$
8*' øìéíî ûü éõøûìò$
3. Net exports = Value of a country's exports
–imports
4. Net welfare effect = consumer’s surplus
loss + producer’s surplus gain + Govt.
revenue
5.
Closed Economy’s output = Y = C+I+G
6. Open Economy’s output = Y =
C+I+G+(X-M)
• Current Account Balance = X-M = Y-
C+I+G
7. Consumption = Income + transfers – taxes
– saving
C = Yd- S p =Y+R-T-S p And,
CA = S p- I+ Govt surplus (or Govt saving)= S p- I+ (T- G- R)
Restated differently, S p + Sg = I + CA
where, Sg = Govt savings
S p = I + CA – Sg
• Current Account Imbalance CA = Sp
+ Sg – I
Reading 21: Currency Exchange Rates
1.
E¥¦64FB G¦456 >6H6> 4B I¥A6J?45 5K¦¦6B5@ 8
Löwü 03ü
2.
M6N> 6O5PNBF6 ¦N?6€ôwü 8 €Lö ü 03ü w3ö 8
Lö ü 0€3ü w3ö
3.
M6N> QO5PNBF6 MN?6 öûõî$òéíwüûìîé'ê 8
Löwü 0 #ëúR
#ëúS
4.
TPNBF6 4B M6N> QO5PNBF6 ¦N?6 8
+ ,è÷SwR
÷SwR 0
&'èUR UR
&'èUSUS
? +
5. Direct Quote =&
úêöéìîíò ïðûòî
6. Points on a forward rate quote = Fwd X-
rate quote –Spot X-rate quote
7. Forward rate = Spot X-rate +Vûì<ñìö øûéêò$
&d–ddd
8. E¥¦WN¦I G¦6A4KAwI4J5¥KB? €4B Þ 8
$øûò þ/ìñòî'€üûì<ñìö øûéêò$w&d–ddd
$øûò þ/ìñòî? +
9. To convert spot rate into a forward quote
(when points are represented as %) = Spot
exchange rate ! (1 + % premium or
discount)
10. Arbitrage relationship is stated as follows:
•
+ , >J 8 Ë ³
Ï
+ , >Q&
!³Ï
•
In case of indirect quote, Arbitrage
relationship is: + , >J 8
+wËQwJ + , >Q jQwJ
•
j³
Ï
8 Ë ³
Ï
&'M³
&'MÏ
• Forward rate as a % of spot rate =
!³wÏ
F³wÏ8
&'M³
&'MÏ
7/24/2019 CFA l 1 Formula Sheet December 2015
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FinQuiz Formula Sheet CFA Level I 2015
11. Return on hedged foreign investment
(with a quoted forward rate) = ËQwJ + ,
>Q&
!³wÏ
12.
Expected % change in the spot rate =F[_%
F[? + 8 ÞèËG'& 8
M³/MÏ
&'MÏ
• Forward points: jQwJ ? ËQwJ 8
ËQwJ
M³/MÏ
&'MÏX Y (where Y is quoted
interest rate period)
13. Relationship between the trade balance and
expenditure/ saving decisions:
= Ex – Im = (Sav – Inv) + (T – G)
where T= taxes net of transfers
G= government expenditures)
14. Price elasticity of demand = ( =Þ í2ñê'î éê Cðñêòéòó
Þ í2ñê'î éê øìéíî = –
Þ è ï
Þ è ë
15. Expenditure (R) = Price ! Quantity = P !
Q
•
% ) in expenditure = % ) R = % ) P
+ % ) Q = (1- () % ) P
16. Basic idea of Marshall-Lerner condition =
ZŸ[Ÿ , Z) [) ? + \ k where,
*x=share of exports
(X=price elasticity of foreign demand for
domestic country exports
*M=share of imports
(M =price elasticity of domestic country
demand for imports
17.
Trade balance = Income (GDP) –
Domestic expenditure = Absorption
Reading 22: Financial Statement Analysis: An
Introduction
1. Gross Profit = Revenue – Cost of sales
2. Operating Profit or EBIT = Gross profit –
Operating costs + Other operating income
3.
Profit before tax = EBIT + non-operatingincome – Interest expense
4. Profit after tax = Profit before tax –
Income tax expense
Reading 23: Financial Reporting Mechanics
1.
Owner’s Equity = Contributed Capital +
R.E
2.
End R.E = Beg R.E + Net income –
Dividends
3.
Assets = Liabilities + Contributed Capital
+ Beg R.E + Revenue – Expenses –
Dividends
Reading 24: Financial Reporting Standards
Reading 25: Understanding Income Statements
1. Revenue recognized on Prorated basis =!ûòñù 8õûðêò ûü #û$ò
!éõî ûü ò2î íûêòìñíò
2. Revenue recognized under Percentage-of-
Completion Method = % of Total cost
spent by the firm ! Total Contract
Revenue
3. Revenue recognized when outcome cannot
be reliably measured
under IFRS, Revenue= Contract costs
incurred "#$%& '( )**+, #- &%.%#"%
&%/-&0%$ "#012 3-#0&430 15 3-6/2%0%
4. Revenue recognized under installment
method =ëìûüéò
÷ñùî$ 0 Cash receipt
5. Wgtd Avg cost per unit =!ûòñù #û$ò ûü ýûûö$ ñ*ñéùñ,ùî üûì ÷ñùî
!ûòñù ðêéò$ ñ*ñéùñ,ùî üûì ÷ñùî
6. COGS using Wghtd Avg Cost = No of
units sold ! Wghtd Avg cost per unit
7. COGS using LIFO = Total cost – Value of
ending inventory
8. Annual Depreciation Expense (using
Straight-Line Method) =#û$ò/)î$éöðñù +ñùðî
7$òéõñòîö "$îüðù -éüî
7/24/2019 CFA l 1 Formula Sheet December 2015
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FinQuiz Formula Sheet CFA Level I 2015
9. Annual Depreciation Expense (Declining
balance method) =&ddÞ
"$îüðù ùéüî ! Acceleration
factor (say 200% or 2) ! Net Book Value
10.
Basic EPS =/îò úêíûõî/ëìîüîììîö ôé*éöîêö$
0'2ò 8*' /û ûü $2ñìî$ ûðò$òñêöéê'
11. Diluted EPS for preferred stock =/îò úêíûõî
0'2ò 8*' /û ûü $2ñìî$ ûw$'/î< íûõõûê $2ñìî$ ò2ñò
<ûðùö 2ñ*î ,îîê é$$ðîö ñò íûê*îì$éûê
12. Diluted EPS for convertible debt =/îò úêíûõî '8! M ûê
íûê*îìòé,ùî öî,ò/ëìîüîìì ôé*0'2ò 8*' êû ûü $2ñìî$ ûw$'8ööéòéûêñù íûõõûê $2ñìî$
ò2ñò <ûðùö 2ñ*î ,îîê é$$ðîö ñò íûê*îì$éûê
13.
Diluted EPS using Treasury Stock Method=
€]6? ^B5¥A6 ? 3¦6¤ 6¦¦6I I4H4I6BIJ
_`FP? aHF ]¥P ¥¤ JPN¦6J ,
€]6W JPN¦6J N? ¥G?4¥B 6O6¦54J6 ?
LPN¦6J GK¦5PNJ6I W4?P
TNJP ¦6564H6I KG¥B 6O6¦54J6 0
€3¦¥G¥¦?4¥B ¥¤ b¦c
14. Net Profit Margin =/îò úêíûõî
)î*îêðî
15. Gross Profit Margin =ýìû$$ ëìûüéò
)î*îêðî
16. Comprehensive EPS = EPS + Other
Comprehensive Income per share
Reading 26: Understanding Balance Sheets
1. Percentage of A/C Receivable estimated to
be uncollectible =8ùùû<ñêíî üûì ôûð,òüðù 8w#
ýìû$$ ñõûðêò ûü 8w# )îíîé*ñ,ùî
2.
Net Identifiable Assets = Fair value ofidentifiable assets – Fair value of liabilities
& contingent liabilities
3.
Amortized cost of PPE = Historical cost –
Accumulated depreciation – Impairment
losses
4. Carrying value for PPE under revaluation
model
= Fair value at date of revaluation –
Accumulated depreciation (if any)
5.
Amortized cost of PPE = Historical cost –
Accumulated depreciation – Impairment
losses
6. Carrying value for PPE under revaluation
model
= Fair value at date of revaluation –
Accumulated depreciation (if any)
7. Deferred tax liability = Taxable income <
Reported Financial Statement Income
before taxes
8. Deferred tax liability = Actual income tax
payable in a period < Income tax expense
9. Vertical common-size balance-sheet =dñùñêíî $2îîò 8õûðêò
!ûòñù 8$$îò$
10.
Current ratio =#ðììîêò 8$$îò$
#ðììîêò -éñ,éùéòéî$
11. Quick (acid test) =#ñ$2'&ñì1îòñ,ùî $îíðìéòéî$')îíîé*ñ,ùî$
#ðììîêò -éñ,éùéòéî$
12. Cash ratio =#ñ$2'&ñì1îòñ,ùî $îíðìéòéî$
#ðììîêò -éñ,éùéòéî$
13.
Long-term debt-to-equity =!ûòñù ùûê'/òîìõ öî,ò
!ûòñù 7Cðéòó
14.
Debt-to-Equity = !ûòñù ôî,ò!ûòñù 7Cðéòó
15.
Total Debt =!ûòñù ôî,ò
!ûòñù 8$$îò$
16. Financial Leverage =!ûòñù 8$$îò$
!ûòñù 7Cðéòó
Reading 27: Understanding Cash Flow
Statements
1.
End Cash = Beg cash + Cash receipts
(from operating, investing, and financing
activities) – Cash payments (for operating,
investing, and financing activities)
2. End A/c Receivable = Beg A/c Receivable
+ Revenues – Cash collected from
customers
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FinQuiz Formula Sheet CFA Level I 2015
3. Cash received from customers = Revenue
– Increase in a/c receivable
4. Purchases from suppliers = COGS +
Increase in inventory
5. Cash paid to suppliers = Cogs + Increase
in inventory – Increase in a/c payable
6. End Inventory = Beg inventory +
Purchases – COGS
7. End a/c payable = Beg a/c payable +
Purchases – Cash paid to suppliers
8.
Cash paid to employees = Salary andwages expense – Increase in salary and
wages payable
9.
End salary and wages payable = Beg salary
and wages payable + Salary and wages
expense – cash paid to employees
10.
Cash paid for other operating expenses =
Other operating expenses – Decrease in
prepaid expenses – Increase in other
accrued liabilities
11. Cash paid for interest = Interest expense +
Decrease in interest payable
12. End Interest Payable = Beg interest
payable + Interest expense – Cash paid for
interest
13. Cash paid for income taxes = Income tax
expense – Increase in income tax payable
14. Historical cost of equipment sold = Beg
balance equipment + Equipment purchased
– End balance equipment
15. Accumulated Dep on equipment sold =
Beg. balance accumulated dep + Dep
expense – End. balance accumulated dep
16. Cash received from sale of equipment =
Historical cost of equipment sold –
Accumulated dep on equipment sold +
gain on sale of equipment
17. Dividends paid = Beg balance of R.E +
Net income – End balance of R.E
18.
FCFF = Net income + Non-cash charges +
Interest expense (1 – tax rate) – Cap exp –
WC expenditures
19.
FCFF = CFO + Interest expense (1 – Tax
rate) – Cap exp
20.
FCFE = CFO – Cap exp + Net borrowing
21. CF to revenue =#V.
/îò )î*îêðî
22.
Cash ROA =#V.
8*îìñ'î !ûòñù 8$$îò$
23. Cash ROE =#V.
8*îìñ'î $2ñìî2ûùöîì$eîCðéòó
24. Cash to income =#V.
.øîìñòéê' éêíûõî
25. Cash flow per share =
#V./ëìîüîììîö ôé*éöîêö$/û ûü íûõõûê $2ñìî$ ûw$
26. Debt Coverage =#V.
!ûòñù ôî,ò
27. Interest Coverage =#V.'úêòîìî$ò øñéö'!ñ9î$ øñéö
úêòîìî$ò øñéö
28. Reinvestment =#V.
#ñ$2 øñéö üûì ùûê'/òîìõ ñ$$îò$
29. Debt payment =#V.
#ñ$2 øñéö üûì -! öî,ò ìîøñóõîêò
30. Dividend payment =#V.
ôé*éöîêö$ øñéö
31.
Investing and Financing =#V.
#ñ$2 ûðòüùû<$ üûì éê*î$òéê' ñêö üéêñêíéê' ñíòé*éòéî$
Reading 28: Financial Analysis Techniques
1. Compound Growth Rate =
7êö +ñùðî
dî' +ñùðî
%
fg gR hijkgSl? +
2.
Combined ratio =-û$$î$ ñêö 79øîê$î$
/îò ëìîõéðõö 7ñìêîö
3. Operating ROA =.øîìñòéê' úêíûõî
8*' !ûòñù 8$$îò$
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FinQuiz Formula Sheet CFA Level I 2015
4. ROA = /îò úêíûõî
8*' !ûòñù 8$$îò$ or
ROA =/îò úêíûõî'úêòîìî$ò 79øîê$î &/!ñ9 ìñòî
8*' !ûòñù 8$$îò$
5. Effective Tax Rate =úêíûõî !ñ9
7ñìêéê'$ ,îüûìî !ñ9
6. Vertical common size income statement =úêíûõî $òñòîõîêò úòîõ
)î*îêðî
7.
Horizontal common size balance sheet =dñùñêíî $2îîò éòîõ éê ÿîñì l
dñùñêíî $2îîò éòîõ éê ÿîñì &
8. Inventory turnover =#û$ò ûü $ñùî$ ûì íû$ò ûü 'ûûö$ $ûùö
8*' úê*îêòûìó
9. Days of Inventory on Hand (DOH) =/û ûü ôñó$ éê øîìéûö
úê*îêòûìó !ðìêû*îì
10. Receivables Turnover =)î*îêðî
8*' )îíîé*ñ,ùî$
11. Days of Sales Outstanding (DSO)
=
/û ûü ôñó$ éê ëîìéûö
)îíîé*ñ,ùî$ òðìêû*îì
12. Avg A/c Receivable Balance = Avg Days’
Credit Sales ! DSO or
Avg A/c Receivable Balance =÷ñùî$
)îíîé*ñ,ùî$ !ðìêû*îì =
÷ñùî$mno
pqr
13. Payables turnover =ëðìí2ñî$
8*' òìñöî øñóñ,ùî$
14.
No of Days of Payables =/û ûü ôñó$ éê øîìéûö
ëñóñ,ùî$ !ðìêû*îì
15. WC Turnover =)î*îêðî
8*' 0#
16. Fixed Asset Turnover =)î*îêðî
8*' /îò Vé9îö 8$$îò$
17. Total Asset Turnover =)î*îêðî
8*' !ûòñù 8$$îò$
18. Pretax margin =7ñìêéê'$ ,îüûìî òñ9 ,ðò ñüòîì éêòîìî$ò
)î*îêðî
19. Return on Total Capital =7dú!
÷2ûìò ñêö ùûê' òîìõ öî,ò ñêö îCðéòó
20.
ROE =/îò úêíûõî
8*' !ûòñù 7Cðéòó
•
ROE = ROA ! Leverage
• ROE = Tax Burden ! Interest Burden
! EBIT Margin ! Total Asset
Turnover ! Leverage
21. Return on Common Equity =
/îò úêíûõî/ëìîüîììîö ôé*éöîêö$8*' #ûõõûê 7Cðéòó
22. Coefficient of Variation of Operating
Income =÷Pô ûü .øîìñòéê' úêíûõî
8*' .øîìñòéê' úêíûõî
23.
Coefficient of Variation of Net Income =÷Pô ûü /îò úêíûõî
8*' /îò úêíûõî
24. Coefficient of Variation of Revenues =÷Pô ûü )î*îêðî
8*' )î*îêðî
25.
Monetary Reserve Requirement (CashReserve Ratio) =
)î$îì*î$ 2îùö ñ$ #îêòìñù dñê1
÷øîíéüéîö ôîøû$éò -éñ,éùéòéî$
26. Liquid Asset Requirement =)îñöéùó &ñì1îòñ,ùî ÷îíðìéòéî$
÷øîíéüéîö ôîøû$éò -éñ,éùéòéî$
27. Net Interest Margin =/îò úêòîìî$ò úêíûõî
!ûòñù úêòîìî$ò 7ñìêéê' 8$$îò$
28.
Sales per Square Meter =)î*îêðî
!ûòñù )îòñéù ÷øñíî éê ÷Cðñìî &îòîì$
29. Average Daily Rate =)ûûõ )î*îêðî
/û ûü )ûûõ$ $ûùö
30.
Occupancy Rate =/û ûü )ûûõ$ ÷ûùö
/û ûü )ûûõ$ ñ*ñéùñ,ùî
31.
EBIT Interest Coverage =7dú!
ýìû$$ úêòîìî$ò
32. EBITDA Interest Coverage =7dú!ô8
ýìû$$ úêòîìî$ò
33. FFO Interest Coverage =VV.'úêòîìî$ò ëñéö/.øîìñòéê' -îñ$î 8ösð$òõîêò$
ýìû$$ úêòîìî$ò
34.
Return on Capital =7dú!
8*' #ñøéòñù =
7dú!
8*' €7Cðéòó'/ûê íðììîêò öîüîììîö òñ9î$'öî,ò
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FinQuiz Formula Sheet CFA Level I 2015
35. FFO to Debt =VV.
!ûòñù ôî,ò
36. Free Operating CF to Debt =#V./#ñø 79ø
!ûòñù ôî,ò
37.
Discretionary CF to Debt =#V./#ñø î9ø/ôé*éöîêö$ øñéö
!ûòñù öî,ò
38.
Net CF to Capital expenditures =VV./ôé*éöîêö$
#ñø î9ø
39. Debt to EBITDA =!ûòñù öî,ò
7dú!ô8
40. Total Debt to total debt plus Equity =
!ûòñù öî,ò!ûòñù öî,ò'7Cðéòó
41. Z-Score = 1.2 ! #8/#-
!8 + 1.4 !
)P7
!8 +
3.3 ! 7dú!
!8 + 0.6 !
&+ ûü $òûí1
d+ ûü ùéñ,éùéòéî$ + 1.0
! ÷ñùî$
!8
42. Segment margin =÷î'õîêò ëìûüéò €-û$$
÷î'õîêò )î*îêðî
43.
Segment turnover = ÷î'õîêò )î*îêðî÷î'õîêò 8$$îò$
44. Segment ROA =÷î'õîêò ëìûüéò €-û$$
÷î'õîêò 8$$îò$
45.
Segment Debt Ratio =÷î'õîêò -éñ,éùéòéî$
÷î'õîêò 8$$îò$
Reading 29: Inventories
1. NRV = Estimated Selling Price –
Estimated Costs of completion and
disposal
2.
Inventory amount net of valuation
allowance = Carrying amount of Inventory
– Write downs
3. (NRV – Normal Profit Margin) + MV +
NRV
Reading 30: Long-Lived Assets
1.
Dep Exp under Straight-line Method =ôîøìîíéñ,ùî #û$ò
7$òéõñòîö "$îüðù -éüî =
té$òûìéíñù #û$ò/7$òéõñòîö )î$éöðñù $ñù*ñ'î +ñùðî
7$òéõñòîö "$îüðù -éüî
2. Dep Exp under Units-of-Production
Method = Depreciable Cost ! ëìûöðíòéûê éê ò2î ëîìéûö
7$òéõñòîö ëìûöðíòé*î #ñøñíéòó
3. Carrying amount under cost model =
Historical Cost – Accumulated Dep or
Amortization
4.
Carrying amount under revaluation model= Fair value at the date of revaluation –
Any subsequent Accumulated Dep or
Amortization
5.
Impairment Loss (IFRS) = Recoverable
Amount – Net Carrying Amount
Where, Recoverable amount = Max [(Fair
value – Costs to sell); Value in Use)] and
Value in use = PV of Expected Future CFs
6.
Impairment Loss (US GAAP) = Asset’s
Fair Value – Carrying Amount …….If
Carrying amount > Undiscounted Expected
Future Cash Flows
Reading 31: Income Taxes
1. Deferred tax asset = Company’s taxable
income > Accounting profit
2.
Tax base of revenue received in advance =
Carrying amount – Any amount of revenuethat will not be taxed at a future date
3. Reported Effective Tax Rate =úêíûõî !ñ9 î9øîê$î
ëìî òñ9 éêíûõî ûì 8ííûðêòéê' ëìûüéò
4.
Deferred tax liability = Carrying amount
of asset > Tax base of asset
5. Deferred tax asset = Carrying amount of
asset < Tax base of asset
6. Deferred tax asset = Carrying amount of
liability > Tax base of asset
7.
Deferred tax liability = Carrying amount of
liability < Tax base of asset
8. Company’s tax expense (or credit)
reported on its income statement = Income
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FinQuiz Formula Sheet CFA Level I 2015
tax liability currently payable + è in
deferred tax asset / liability
Where,
• Income Tax liability currently
payable = Taxable income ! Tax
rate
•
èin deferred tax asset / liability =
Diff b/w the balance of the
deferred tax asset / liability for the
current period and the balance of
the previous period.
9. The company’s tax expense (or credit)
reported on its income statement = Taxes
payable + () Deferred tax liability - )
Deferred tax asset)Where,
• Income Tax liability currently
payable = Taxable income ! Tax
rate
• Deferred tax liability = (carrying
amount – tax base) ! tax rate
• Deferred tax asset = (tax base –
carrying amount) ! tax rate
10. Tax base of a liability = Carrying amount
of the liability – Amounts that will be
deductible for tax purposes in the future
Reading 32: Non-current (Long-term)
Liabilities
1. Annual Interest Payment = Face Value !
Coupon Rate
2. Sale proceeds of bond = Sum of PV of
Interest Payments + PV of Face value of
Bond
3.
When Face value - Sale proceed is > zero,
discount
4. When Face value – Sale proceed is < zero,
premium
5. Initial carrying amount = Face value – (+)
Discount (Premium)
6.
Total Interest Expense (in case of discount)
= Periodic interest payments +
Amortization of Discount7. Total Interest Expense (in case of
premium) = Periodic interest payments -
Amortization of Premium
8. Amount of Bonds payable reported on the
balance sheet = Historical cos t +/-
Cumulative amortization (or amortization
cost)
9. Amount of Bonds payable initially
reported on the balance sheet under IFRS =
Sales proceeds – Issuance costs
10.
Amount of Bonds payable initially
reported on the balance sheet under US
GAAP = Sales proceeds
11.
Bond interest expense under effective
interest rate method = Carrying value of
the bonds at the beginning of the period !
Effective interest rate
12. Bond Interest Payment under effective
interest rate method = Face value of the
bonds ! Contractual (coupon) rate
13. Amortization of the discount or premium
under effective interest rate method =
Bond interest expense – Bond interest
payment
14. Bond Discount/Premium Amortization
under Straight-line Method =dûêö ôé$íûðêò ûì øìîõéðõ
/û ûü úêòîìî$ò ëîìéûö$
15.
No of shares subscribed when warrants are
exercised =8''ìî'ñòî øìéêíéøñù ñõûðêò ûü öî,ò
ëñì *ñùðî ûü ñ ùûò
! shares subscribed per lot
16. Carrying amount of the leased asset =
Initial recognition amount – Accumulated
depreciation
17.
Accumulated depreciation = Prior year’s
accumulated depreciation + Current year’s
depreciation expense
18.
Interest expense = Lease liability at the beg
of the period ! interest rate implicit in the
lease
19. Sales revenue = lower of the fair value of
the asset and PV of the min lease payments
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FinQuiz Formula Sheet CFA Level I 2015
20. Cost of sales = Carrying amount of the
leased asset – PV of the estimated
unguaranteed residual value
21.
Interest Revenue = Lease receivable at the
beg of the period ! Interest rate
22. Net interest expense = Beg Net pension
liability ! Discount rate
23. Net Interest income = Beg Net Pension
asset ! Discount rate
24.
Reported pension expense (U.S. GAAP) =
Pension costs – Expected return on
Pension plan assets
25. Funded Status = PV of the Defined benefit
obligations – Fair value of the plan assets
Reading 33: Financial Reporting Quality
Reading 34: Financial Statement Analysis:
Applications
1.
Company’s sales = Projected market share
! Projected total industry sales
2. Forecast amount of profit for a given
period = Forecasted amount of sales !
Forecast of the selected profit margin
3. Retained CF (RCF) / Total debt =
€ûøîìñòéê' #V ,îüûìî 0# í2ñê'î$ u öé*éöîêö$
òûòñù öî,ò
4.
)îòñéêîö #V/#ñø î9ø
!ûòñù ôî,ò
5. Inventory value adjusted to FIFO basis =
End Inventory value under LIFO + End
LIFO reserve balance
6. COGS adjusted to a FIFO basis = COGS
under LIFO – (End LIFO reserve – Beg
LIFO reserve)
7. Useful life of the company’s overall asset
base that has passed =8ííðõðùñòîö ôîø
ýìû$$ ëë7
8. Avg age of the asset base =8ííðõðùñòîö ôîø
8êêðñù ôîø î9øîê$î
9.
Remaining useful life of the asset =/îò ëë7 €êîò ûü ñííðõðùñòîö öîø
8êêðñù öîø î9øîê$î
10. Avg depreciable life of the assets at
installation =ýìû$$ ëë7
8êêðñù ôîø î9øîê$î
11. % of asset base that is being renewed
through new capital investment =#ñøî9
ýìû$$ ëë7' #ñøî9
12.
Adjusted BV = Total stockholders’ equity
– Goodwill
13. Adjusted Price to BV ratio =ëìéíî õñì1îò íñøéòñùévñòéûê
8ösð$òîö d+
14. Tangible B.V = Total stockholders’ equity
– Goodwill – Other intangible assets15. Price to tangible BV ratio =
ëìéíî
!ñê'é,ùî d+
16. Adjusted debt-to-equity ratio =)îøûìòîö öî,ò'ë+ ûü ûøîìñòéê' ùîñ$î
)îøûìòîö 7Cðéòó
17. Adjusted debt-to-asset ratio =)îøûìòîö öî,ò'ë+ ûü ûøîìñòéê' ùîñ$î
)îøûìòîö 8$$îò' ë+ ûü ûøîìñòéê' ùîñ$î
18. Adjusted Asset Turnover ratio =
÷ñùî$)îøûìòîö 8*' òûòñù ñ$$îò$'ë+ ûü ûøîìñòéê' ùîñ$î
19.
PV of future operating lease payments* =ë+ ûü íñøéòñù ùîñ$î øñóõîêò$
"êöé$íûðêòîö /ûêíðììîêò #ñøéòñù -îñ$î øñóõîêò$
! Undiscounted Noncurrent Operating
Lease Payments
*If term structures of capital and operating
leases are assumed to be similar
20.
Interest expense = Interest ! PV of thelease payments
21. Depreciation expense estimated on
straight-line basis =ë+ ûü ò2î ùîñ$î øñóõîêò$
/û ûü óì$ ûü üðòðìî ùîñ$î øñóõîêò$
22. Adjusted Interest Coverage ratio =
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FinQuiz Formula Sheet CFA Level I 2015
Qw^x Ê , ¦6B? 6OG ÊÊ ?y6G 6OG ÊÊ
> 6OG6BJ6 Ê ,> 5¥J?J ÊÊ
* Unadjusted
**associated with the operating lease
obligations
Reading 35: Capital Budgeting
1.
Incremental CF = CF with a decision - CF
without that decision
2. NPV = PV of cash inflows - IO =
NPV =
t =1
n
!AT CFs at time t
1+ Req RoR( )t " IO
3. Avg Accounting RoR (AAR) =8*' /ú ñüòîì öîø Ò GHŸI7 ,îüûìî éêòîìî$ò
8*' d+ ûü úê*$ò
4. PI =ë+ ûü üðòðìî #V$
ú. = 1 +
/ë+
ú.
5. Value of a company = Value of company’s
existing invst + Net PV of all of
company’s future invst
Reading 36: Cost of Capital
1. WACC = wdr d (1 – t) + w pr p + wer e
2.
Debt-to-Equity Ratio conversion into
weight (i.e. Debt / (Debt + Equity) =piz{
|}~k{•
&'piz{
|}~k{•
3. Optimal Capital Budget is the point where
MC of capital = Marginal return from
investing
4.
After-tax cost of debt = Before-tax
Marginal Cost of Debt ! (1 – firm’s
marginal tax rate)
5. Preferred Stock Price per Share
=ëìîü ÷òûí1 ôé* øîì ÷2ñìî
#û$ò ûü ëìîü ÷òûí1
6. Expected Return on Stock I (under CAPM)
= E (R i) = R F + ,i [E (R M) – R F]
7. Expected Return on Stock I = E (R i) = R F +
,i1 (Factor risk premium)1 + ,i2 (Factor
risk premium)2+…..+,i j (Factor risk
premium) j
8. Cost of Equity = € 8 ô%
ëg, F
9. Expected Growth Rate of Dividends
g = (1 -ô
7ë÷) ! ROE
g = retention rate ! ROE
10. Company’s stock returns = Méò 8 N ,
‚Mõò
11.
Unlevered ƒ of Comparable Company =
ƒ"– íûõøñ 8„
…– †g‡hˆjˆz‰i
&' &/ò†g‡hˆjˆz‰i
p†g‡hˆjˆz‰i|†g‡hˆjˆz‰i
12. Levered ƒ of Project =
ŠB– S(O 8 ŠÝ– bO.S + , + ? :S(O
‹S(O
”S(O
13.
ŠH77IG 8 ŒŽ†[
&' &/G s
‘
14. ŠI~TMGa 8 ŠH77IG + , + ? : h
’
15.
Sovereign yield spread = Govt bond yield
(denominated in developed country’s
currency) – T.B yield on a similar maturity
bond in developed country
16.
Country equity premium = Sovereign yield
spread ! 8êê ÷Pô ûü 7Cðéòó éêöî9
8êê ÷Pô ûü $û*îìîé'ê ,ûêö &1ò éê
òîìõ$ ûü öî*îùûøîö õ1ò íðììîêíó
17. Cost of equity = K e= R F + ,[(E(R M)-R F) +
CRP]
18. Breakpoint =8õûðêò ûü íñøéòñù ñò <2éí2 $ûðìíîe$ íû$ò ûü íñø è
ëìûø ûü êî< íñø ìñé$îö üìûõ ò2î $ûðìíî
19. Cost of Capital when flotation costs are in
monetary terms= ¦î 8 ô%
ëg/V , F
20. When FC are in terms of % of the share
price: Cost of Equity = ¦î 8 ô%
ëg &/ü , F
21. If FC are not tax deductible: NPV = PV of
Cash Inflows – IO – (FC in % ! New
Equity Capital)
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FinQuiz Formula Sheet CFA Level I 2015
22. If FC are tax deductible: NPV = PV of
Cash Inflows – IO – [(FC in % ! New
Equity Capital) ! (1 – Marginal Tax Rate)]
23. Asset ƒ = (Debt ƒ ! Proportion of Debt) +
(Equity ƒ ! Proportion of Equity)
Reading 37: Measures of Leverage
1.
Contribution Margin (CM) = (# of units
sold) ! [(price per unit) - (variable cost per
unit)]
2. Per unit CM = Price per unit - Variable
cost per unit
3.
Operating income = CM – Fixed OperatingCosts
4. DOL =Þ è éê .øîìñòéê' úêíûõî 7dú!
Þ è éê "êéò$ ÷ûùö
or
DOL=#&
#&/ Vé9îö .øîìñòéê' #û$ò
5. DFL =Þ è éê /îò úêíûõî
Þ è éê .øîìñòéê' úêíûõîor
#&/ Vé9îö .ø #û$ò
#&/Vé9îö .ø #û$ò$/Vé9îö Véê #û$ò
6. DTL=Þ è éê /îò úêíûõî
Þ è éê /û ûü "êéò$ ÷ûùö = DOL ! DFL =
#&
#&/Vé9îö .ø #û$ò$/Vé9îö Véê #û$ò
7.
Break-even Revenue = (Variable cost per
unit ! Break-even Number of Units) +
Fixed Operating costs + Fixed Financial
Cost
8. Breakeven Number of units =Vé9îö .øîìñòéê' #û$ò$'Vé9îö Véêñêíéñù #û$ò$
ëìéíî øîì ðêéò/+ñìéñ,ùî íû$ò øîì ðêéò
Reading 38: Dividends & Share Repurchases:
Basics
1. Company’s payout for the year = Cash
dividends + Value of shares repurchased in
any given year
2. Dividend Payout ratio =#ûõõûê $2ñìî íñ$2 öé*éöîêö$
/îò úêíûõî ñ*ñéùñ,ùî òû íûõõûê $2ñìî$
3.
EPS after Stock Dividend = EPS before
Dividend ! ÷2ñìî$ ûw$ ,îüûìî ôé*éöîêö
÷2ñìî$ ûw$ ñüòîì ôé*éöîêö
4.
Stock Price after Stock Dividend = Stock
Price before Dividend ! EPS after
Dividend
5. Total Market Value after Stock Dividend =
Shares outstanding after Dividend ! Stock
price after Dividend
6.
Stock price after 2-for-1 stock split =÷òûí1 øìéíî ,îüûìî $òûí1 $øùéò
l
7. EPS after 2-for-1 stock split =7ë÷ ,îüûìî $òûí1 $øùéò
l
8.
DPS after 2-for-1 stock split =ôë÷ ,îüûìî $òûí1 $øùéò
l
9. EPS after buyback =7ñìêéê'$/8üòîì òñ9 #û$ò ûü Vðêö$
÷2ñìî$ .ðò$òñêöéê' ñüòîì dðó,ñí1
10.
Ex-dividend value of share = Stock price –Dividend per share
11. Market value of Equity after distribution of
cash dividends =
_€’ ûü $2ñìî$ ûw$ 0 €&+ $2ñìî u #ñ$2 öé*c
’ ûü $2ñìî$ ûw$
12. Post-repurchase share price =
’ûü $2ñìî$ ûw$ 0 €&+ $2ñìî u
<ûìò2 ûü ÷2ñìî ìîøðìí2ñ$îc
€ ’ ûü $2ñìî$ ûw$/’ ûü $2ñìî$ ìîøðìí2ñ$îö €íñê ,î ìîøðìí2ñ$î
Reading 39: Working Capital Management
1. Operating cycle = No of days of inventory
+ No of days of receivables
2. Net operating cycle = No of days of
inventory + No of days of receivables – No
of days payables
3. Money Market Yield =Vñíî *ñùðî/ëðìí2ñ$î øìéíî
ëðìí2ñ$î øìéíî 0
pqd
/û ûü öñó$ òû õñòðìéòó
4.
Bond Equivalent Yield =Vñíî *ñùðî/ëðìí2ñ$î øìéíî
ëðìí2ñ$î øìéíî0
pqv
/û ûü öñó$ òû õñòðìéòó
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FinQuiz Formula Sheet CFA Level I 2015
5. Discount-basis Yield =Vñíî *ñùðî/ëðìí2ñ$î øìéíî
Vñíî +ñùðî0
pqd
/û ûü öñó$ òû õñòðìéòó
6.
Wght Avg collection period = wghts !
Avg no of days to collect accounts within
each age category
Where, Weights = % of total receivables in
each category
7. Float Factor =8*' ôñéùó Vùûñò
8*' ôñéùó ôîøû$éò =
8*' ôñéùó Vùûñò“g{ˆ‰ ”‡g~{ gR –—i†˜l pihglk{iS
fg gR pˆ•l
Where, Float =Amount of money that is in
transit b/w payments (by customers) and
funds (usable by co)
8. Value of stretching payment = A/c payable
! Co's opportunity cost for ST funds
9.
Cost of Trade Credit = + ,
ôé$íûðêò
&/ôé$íûðêò
mno
? + where n = days beyond discount period
10. Cost of Line of Credit =úêòîìî$ò'#ûõõéòõîêò üîî
-ûñê 8õûðêò
11. Bankers Acceptance Cost =úêòîìî$ò
/îò øìûíîîö$ =
úêòîìî$ò
-ûñê ñõûðêò/úêòîìî$ò
12. Commercial Paper Cost
=úêòîìî$ò'ôîñùîìe$ íûõõé$$éûê'dñí1ðø íû$ò$
-ûñê ñõûðêò/úêòîìî$ò
13. Annualized cost = Cost ! 12
Reading 40: The Corporate Governance of
Listed Companies
Reading 41: Portfolio Management: An
Overview
1. NAV of bond mutual fund =€*ñùðî ûü îñí2 ,ûêö éê ò2î øûìòüûùéû
/û ûü $2ñìî$
2. New Shares that need to be created =8õûðêò òû ,î úê*î$òîö éê ò2î Vðêö
/8+ øîì $2ñìî ûì !ûòñù *ñùðî øîì $2ñìî ûü ñ &ðòðñù Vðêö
3. New NAV of the Fund = NAV or Total
value of a Mutual Fund + Amount to be
invested in the Fund
4. No of shares need to be retired =8õûðêò òû ,î <éò2öìñ<ê üìûõ ò2î Vðêö
/8+ øîì $2ñìî ûì !ûòñù *ñùðî øîì $2ñìî ûü ñ &ðòðñù Vðêö
Reading 42: Portfolio Risk & Return: Part I
1.
Total Return = Capital Gain (or Loss) +
Dividend Yield
2. Capital Gain =ë{/ë{Ñ%
ë{Ñ%
3. Dividend Yield =ô{
ë{Ñ%
4. 3-Yr HPR = [(1 + R 1) ! (1 + R 2) ! (1 +
R 3)]– 1
5. Arithmetic mean (AM) R = ZM 8N†%'N†‹'´'N†P™Ñ%'N†™
* 8
&
* ZMG
*G\&
6. Geometric R for n periods = MDM 8
+ , Z& + , Zl m + , ZL&
* ? +
7. IRR =#V ñò !éõî ò
&'ú)) { 8 k!
ò\d
8. Annualized Return (Ann R):
•
Ann R = (1 + Quarterly R) 4 – 1
• Ann R = (1 + Monthly R)12
– 1
• Ann R = (1 + Weekly R) 52 – 1
• Ann R = (1 + Daily R) 365 – 1
• Weekly R = (1 + Daily R) 5 – 1
• Weekly R = (1 + Annual R) 1/52 – 1
9. Portf R (for Two Assets) = (Wght of Asset
1 ! R of Asset 1) + (Wght of Asset 2 ! R
of Asset 2)
10. Gross R = R – Trading exp – other exp
directly related to the generation of returns.
11.
Net R = Gross R - All managerial and
administrative exp
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FinQuiz Formula Sheet CFA Level I 2015
15. Total Weight of Nonmarket securities in
portfolio should be proportional to =
„†¥†#†‡%
„†‹™†
‹#†‡%
16.
Information Ratio =8ùø2ñ ûü ÷îíðìéòó é
/ûê$ó$òîõñòéí )é$1 ûü ÷îíðìéòó é
17. Expected Return of Portfolio (under
Arbitrage Pricing Model) = Q Mø 8 M V ,
¦ ùƒø–ú , ´ , ¦ 1ƒø–1
18. Return on an Asset in excess of 1-Month
T-Bill Return (under four factor model) =
Q Méò 8 ¤é , ƒé–&§!¢¨xò ,
ƒé–÷&dL¢wò , ƒé–t&-©¢ªò , ƒé–"&ô«¢yò
Reading 44: Basics of Portfolio Planning &
Construction
1.
Investor’s Expected Utility from Portfolio
= U p = E (R p) – /%2 p
2. Tactical Asset Allocation (TAA) Return
contribution = Actual return of the
portfolio – Return that would have beenearned if the asset class weights were equal
to the policy weights
Reading 45: Market Organization & Structure
1. Total return to a Leveraged Stock Purchase
=)îõñéêéê' 7Cðéòó/ú.
ú.where,
Remaining Equity = IO – Purchase
commission + (-) Trading g(l) – Margin i
paid + Div received – Sales commission
paid
OR
Remaining Equity = Proceeds on sale –
Payoff loan – Margin i paid + Div received
– Sales commission paid
2. ROE (based on leverage alone)
= Leverage (in times) ! stock price return
(in %)
3.
Price of stock below which a margin call
will take place (P):
^B4?4N> AN¦F4B ¬ , €3 ? ^B4?4N> L? ¥5 3¦4563
8 ¢N4B?6BNB56 ¢N¦F4B M6K4¦6A6B? €Þ
4.
Total cost of placement to the issuing firm
in IPO ($)
= Gross proceeds received by the issuing
firm – Net proceeds received by the issuing
firm
5. Total cost of placement to the issuing firm
in IPO (%) =€ýìû$$ øìûíîîö$ ìîíîé*îö ,ó úV/
/îò øìûíîîö$ ìîíîé*îö ,ó úV
/îò øìûíîîö$ ìîíîé*îö ,ó úV
where IF = Issuing firm
6.
Max leverage ratio =&ddÞ
Þ ûü 7Cðéòó
7. Max leverage ratio for position financed by
min margin requirement =&
&éê õñì'éê ìîCðéìîõîêò
Reading 46: Security Market Indices
1. Value of a price return index =
VPRI = D
P n
N
i
ii!=1
For Single Period:
2.
% Change in value of Price return index
Portfolio = PR I = 0
01
PRI
PRI PRI
V
V V !
3. Price Return (Ind constituent security):PR I
=
0
01
i
ii
P
P P !
4.
Price return of the index: PR I =
!=
""#
$%%&
' ( N
i i
ii
i
P
P P w
1 0
01
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FinQuiz Formula Sheet CFA Level I 2015
5. Total return of Index Portfolio:
0
01
PRI
I PRI PRI
V
IncV V +!
6.
Total return of each security = TR i =
i
iii
P
Inc P P
0
01 +!
!=
""#
$%%&
' +(=
N
i i
iii
i
P
Inc P P wturnTotal
1 0
01Re
Over Multiple Time Periods:
7.
Value of Price Return index at time t =
VPRIT = VPRI0 (1 + PR I1) (1 + PR I2) … (1 +
PR IT)
8. Value of Total Return index at time t =
VTRIT = V TRI0 (1 + TR I 1) (1 + TR I 2) … (1 +
TR I T)
9. Weight of security i under price weighting
=ëìéíî ûü $îíðìéòó é
÷ðõ ûü ñùù øìéíî$ ûü íûê$òéòðîêò $îíðìéòéî$
10. Weight of security i under equal weighting
=&
/û ûü $îíðìéòéî$ éê ò2î éêöî9
11. Weight of security i under market-cap
weighting =/d ûü $2ñìî$ ûw$ ûü ÷é 0 ÷2ñìî øìéíî ûü ÷é
/û ûü $2ñìî$ ûw$ ûü ÷é 0 ÷2ñìî øìéíî ûü ÷éf®‡%
Where Si = Security i
12. Weight of Si under Float-Adjusted Mkt
Cap weighting =Vìñíòéûê ûü $2ñìî$ ûw$ õ1ò üùûñò 0 ûü $2ñìî$ ÷é 0
÷2ñìî øìéíî ûü $îíðìéòó é
€Vìñíòéûê ûü $2ñìî$ ûw$ &1ò üùûñò 0 ûü $2ñìî$ ûw$ ûü ÷é 0
÷2ñìî øìéíî ûü $îíðìéòó é
13. Fundamental weight on security i =Vðêöñõîêòñù $évî õîñ$ðìî ûü íûõøñêó éÊ
€Vðêöñõîêòñù $évî õîñ$ðìî ûü íûõøñêó éf®‡%
*Book value, cash flow, revenues, earnings,
dividends, & number of employees.
Reading 47:Market Efficiency
Reading 48: Overview of equity Securities
1. Equity security’s Total Return =÷ñùî ë ûü ñ $2ñìî/ëðì2ñ$î ë ûü ñ $2ñìî'íñ$2w$òûí1 ôé*
ëðìí2ñ$î øìéíî ûü ñ $2ñìî
2. ROE in yr t =/ú €üûì .ìöéêñìó ÷2ñìî2ûùöîì$ éê óì ò
8*' !ûòñù d+ ûü 7Cðéòó
OR
ROE =/ú €üûì .ìöéêñìó ÷2ñìî2ûùöîì$ éê óì ò
÷2ñìî2ûùöîì$eîCðéòó ñò ,î' ûü óì ò
3. MV of equity = Mkt price per share !
Shares O/s
4. BV of equity per share =!ûòñù ÷te$ îCðéòó
÷2ñìî$ ûw$
5. Price-to-book ratio =&ñì1îò øìéíî øîì $2ñìî
d+ ûü îCðéòó øîì $2ñìî
6. ROE = Net profit margin ! Asset turnover
! Financial leverage =/îò îñìêéê'$
/îò $ñùî$ 0
/îò $ñùî$
8*' òûòñù ñ$$îò$ 0
8*' òûòñù ñ$$îò$
8*' íûõõûê îCðéòó
Reading 49: Introduction to Industry &
Company Analysis
Reading 50: Equity Valuation: Concepts &
Basic Tools
1.
Value of a share of stock today =79øîíòîö öé*éöîêö éê óì ò
€&'ìîCðéìîö ).) ûê $òûí1{¯ò\&
If an investor intends to buy and hold a share
for 1 yr:
2. Value of a share of stock today =79øîíòîö ôé* éê & óì '79øîíòîö $îùùéê' øìéíî éê & óîñì
€&'ìîC )û) ûê $òûí1%
3. Value of a share of stock for n holding
periods or investment horizon =79øîíòîö ôé* éê óì ò
&'ìîC ) ûê $òûí1 { ,L
G\&
79øîíòîö øìéíî éê ê øîìéûö$&'ìîC ) ûê $òûí1
4. CFO = NI + Non-cash exp – Inv in WC
5.
FCFE = CFO – FCInv + Net Borrowing
6. Value of a share for a non-div-paying
stock =V#V7 éê óîñì ò
&'ìîC ) ûê $òûí1 {¯ò\&
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FinQuiz Formula Sheet CFA Level I 2015
7. ReqRoR on sharei = Current expected Rf
rate + Beta i [MRP]
8. Value of a pref stock (non-callable, non-
convertible) =
( ) ( )r
D
r
D
g r
g DV 000
0
0
011=
!
+
=
!
+
=
9. Value of a pref stock (non-callable, non-
convertible) with maturity at time n =
Ad 8‹d
€ + , 5 G ,
L
G\&
j
+ , 5 L
Gordon Growth Model:
10.
Value of a share of stock =( )r g
g r
D
g r
g DV <
!
=
!
+
= ,1
10
0
11. Sustainable dividend growth rate =
g = ROE ! b
where b = earnings retention rate = (1 -
Dividend payout ra tio)
Two-stage valuation model:
12.
Value of share today = V0 =
Ad 8‹d + , 7
G
€ + , 5 G ,
AL
€+ , 5L
L
G\&
AL 8‹L'&
5 ? B
‹L'& 8 ‹d€ + , 7L + , B
13. Justified P/E =ëd
7&8
ô%w7%
ì/' 8
ø
ì/'
14. EV = MV of stock + MV of debt – Cash
and cash Equivalents
15.
Asset-based value = Value of Assets –
Value of Liabilities
Reading 51: Fixed Income Securities: Defining
Elements
1. Inf adj Principal amount of a zero-coupon-
indexed bond
= [Par value ! (1 + CPI)]
2.
Inf adj coupon payment for an interest-
indexed bond
= [(coupon rate ! Par value) ! (1+CPI)]
3. Inf adj Principal amount of a capital-
indexed bond
= [Par value ! (1 + CPI)]
4. Inflation adjusted coupon payment for a
capital-indexed bond
= [Par value ! (1 + CPI)] ! coupon rate
Reading 52: Fixed Income Markets: Issuance,
Trading & Funding
Reading 53: Introduction to Fixed Income
Valuation
1. Amount of discount below par value =
Present value of deficiency
2. Present value of deficiency =#ûðøûê ìñòî/&ñì1îò öé$íûðêò ìñòî 0ëñì *ñùðî
&'&ñì1îò öé$íûðêò ìñòî {êò\&
3. Bond price =
PV = PMT
(1+ r)1 + PMT
(1+ r)2 + ...+ PMT + FV
(1+ r) N
4.
% Price change =/î< øìéíî/.ùö øìéíî
.ùö øìéíî
5. Bond price (given sequence of spot rates)
= PV =
PMT
(1+ Z 1)1 +
PMT
(1+ Z 2 )2 +...+
PMT + FV
(1+ Z N ) N
6. Full price of bond = Flat price of bond +
Accrued interest
7. Accrued interest = a^ 8G
*0@]^
8. Full price of a fixed-rate bond between
coupon payments = PVFull
=
PMT
(1+ r)1!t /T
+
PMT
(1+ r)2!t /T
+...+PMT + FV
(1+ r) N !t /T
9. Full price of a fixed-rate bond between
coupon payments
PV ! (1+ r)t /T
10. Interpolated yield (say for 3-year, given
market discount rates for 2 and 5 yrs) =
(Average yield for 2 year bonds) +p/l
v/l !
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FinQuiz Formula Sheet CFA Level I 2015
(average yield for 5 year bonds – average
yield for 2 year bonds)
11. 1+ APR
m
m
!
"
#$
%
&
m
= 1+ APR
n
n
!
"
#$
%
&
n
12. Current yield =÷ðõ ûü íûðøûê øñóõîêò$ ìîíîé*îö û*îì ò2î óîñì
Vùñò øìéíî
13. Price of Floating-rate note = PV=
( I +Qm)!FV
m
1+ I + DM
m
"
#$
%
&'1 +
( I +QM )!FV
m
1+ I + DM
m
"
#$
%
&'2 +...+
( I +QM )!FV
m+FV
1+ I + DM
m
"
#$
%
&' N
14. Price of Money Market Instrument (on a
discount-rate basis) =
PV = FV ! 1" Days
Year! DR
#
$%
&
'(
15. Market Discount Rate =
DR = Year Days( )! FV " PV
FV
#
$%
&
'(
16. Price of Money Market Instrument (on an
add-on rate basis)=
PV =FV
1+ Days
Yr! AOR
"
#$
%
&'
17. Add-on rate =
AOR =Yr
Days
!
"#
$
%&'
FV ( PV
PV
!
"#
$
%&
Relation b/w two spot rates and Implied
Forward Rate:
18. (1 + zA)A ! (1 + IFR A,B-A)B-A = (1 + zB)B
Z-spread over the benchmark spot curve:
Price of a bond =
PV =PMT
(1+ z1+ Z )
1 +
PMT
(1+ z2 + Z )
2 +...+
PMT + FV
(1+ z N + Z )
N
19. OAS = Z-spread – Option value (bps per
year)
20. G-spread = Yield-to-maturity on Corporate
bond – Yield-to-maturity on a government
bond
21. Interpolated Spread = I-spread = Yield to
maturity of the bond - Standard swap rate
in that currency of the same tenor
Reading 54: Introduction to Asset Backed
Securities
1. Loan-to-value ratio (LTV) =ëìûøîìòóe$ øðìí2ñ$î øìéíî
8õûðêò ûü &ûìò'ñ'î
2. Monthly CF for a MPS = Monthly CF of
underlying pool of mortgages - Servicing
fee - Other fees
3. Pass-through rate = Mortgage rate on the
underlying pool of mortgages – Servicing
Fee - Other fees
4.
SMM = Pre-pmt for month ÷ (Beg
mortgage balance for month – Scheduled
principal re-pmt for month)
5. CPR = 1 0 (1 0 SMM)12
6. CF Construction (Monthly CF for MPS):
• Net interest = (Beg mortgage
balance ! Pass-through rate) / 12
• Scheduled principal re-pmt =
Mortgage pmt – Gross i- pmt• Gross i- pmt = (Beg mortgage
balance ! WAC) / 12
• Pre-pmt for month = SMM !
(Beg mortgage balance for month
– Scheduled principal re-pmt for
month)
• Total principal re-pmt =
Scheduled principal re-pmt +
Prepayment
• Beg mortgage balance for the
following month = Beg mortgage
balance for the month – Total
Principal Pmt
• Projected CF for MPS = Net i-
pmt + Total principal re-pmt
7. DSC ratio =ëìûøîìòó°$ ñêêðñù /.ú
ôî,ò $îì*éíî
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FinQuiz Formula Sheet CFA Level I 2015
Reading 55: Understanding Fixed Income Risk
& Return
1. Interest-on-interest gain from
compounding = Future value of reinvested
coupons - Total amount of coupon payments
Where,
FV of Reinvested Coupons = [CR !(1+
RR)n-1] + [CR !(1+RR) n-2] +…+ [CR !(1+
RR)n-n]
Total Amount of Coupon Pmt = CR ! Par
value ! No of periods
RR = Re-invstmnt rate per period
CR = coupon rate
2. Realized RoR on Bond=
÷ðõ ûü )îéê*î$òîö #ûðøûê$'
)îöîõøòéûê ûü ëìéêíéøñù ñò &ñòðìéòó
dûêö ëìéíî
%
n
? +
3. Carrying value of bond (if bond purchased
below par) = Purchase price + Amortized
amount of Discount
4.
Carrying value of a bond (if bond purchased above par) = Purchase price –
Amortized amount of Premium
5. Amortized amount for 1st year = Bond
Price after 1-yr - Initial bond price
6. Capital g / (l) = Sale price of Bond after n
years – Carrying value of Bond after n
years
7.
Macaulay Duration =
MacDur = 1! t / T ( )
PMT
1+ r( )1!t /T
PV Full
"
#
$$$$
%
&
''''
+ 2! t / T ( )
PMT
1+ r( )2!t /T
PV Full
"
#
$$$$
%
&
''''
+...+ N ! t / T ( )
PMT + FV
1+ r( ) N !t /T
PV Full
"
#
$$$$
%
&
''''
(
)
**
+
**
,
-
**
.
**
OR
MacDur =1+ r
r!
1+ r + N " c! r( )#$ %&
c" 1+ r( ) N
!1#$
%&+ r
'
()
*)
+
,)
-)! (t /T )
8. Modified D =&ñíôðì
&'ì
9. Annualized Modified D =&ûöéüéîö ôðìñòéûê
ëîìéûöéíéó ûü øñóõîêò éê ñ óîñì
10. % 1 PVFull
= - AnnModDur ! 1Yield
11. Approx Modified D =
(PV ! )! (PV
+)
2" (#Yield )" (PV 0)
12. Approx Mac Dur = Approx Mod Dur ! (1
+ r)
13.
Effective D =(PV
! )! (PV
+)
2" (#Curve)" (PV 0)
14. Macaulay D for a Zero-coupon bond =1/G
*
15. Macaulay D for a Perpetual bond = (1+ r) /
r
16. Avg Mod D for the Portf =
¢¥I y ¥¤ w¥BI + 0&+ ûü dûêö &
!ûòñù &+ûü ëûìòü
+ ¢¥I y ¥¤ w¥BI ª 0&+ ûü dûêö l
!ûòñù &+ ûü ëûìòü +
…+ ¢¥I y ¥¤ w¥BI ] 0&+ ûü dûêö /
!ûòñù &+ ûü ëûìòü
17. Money D = Annualized Mod D ! Full
Bond Price
18. ) Full price of Bond (in currency units) # -
Money D ! è in annual YTM
19. PVBP =(PV
!
)!(PV
+)
2
20. Basis Point Value (BPV) = Money
duration ! 0.0001 (1 bp)
21. Bloomberg’s Risk Statistic = PVBP ! 100
22. %)PVFull
= (-AnnModDur ! )Yield) +&
l
0‘==iX=4¡>:± 0€èu>4±<l
23. Approx. Convexity Adjustment =
(PV !)+ (PV
+)![2" (PV 0 )]
(#Yield )2" (PV 0 )
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FinQuiz Formula Sheet CFA Level I 2015
24. Convexity of a zero coupon bond =
N ! (t /T )[ ]" N +1! (t /T )[ ](1+ r)
2
25.
Money Convexity vs Money Duration =)PV Full # - (MoneyDur ! )Yield) + [
&
l !
MoneyCon ! ()Yield)2]
26. Money Convexity of bond = Annual
Convexity ! Full Price
27. Effective Convexity =
PV !( )+ PV +
( )! 2" (PV 0)[ ]#$ %&
'Curve( )
2
" PV 0 )( )
28. Duration Gap = Bond’s Macaulay
Duration – Investment Horizon
Reading 56: Fundamentals of Credit Analysis
1. Expected Loss = Default Probability !
Loss Severity given Default
2.
Funds From Operations = NI +Dep +
Amor+ Deferred income taxes noncashitems
Where NI = Net Income
3. FCF Before Div = NI – Cap exp. – (+) Inc
(dec) in Non-cash WC – Non-recurring
items
4. FCF After Div = FCF Before Div – Div
5. Operating Profit Margin =.øîìñòéê' úêíûõî
)î*îêðî
6. EBITDA = Operating Income + Dep +
Amort
7.
FCF = CFO – Cap exp– Div
8. Capital expenditures = Additions to P&E +
Additions to product rights & intangibles –
Proceeds of sale of P&E
9. Total debt = ST debt + Current portion of
LT debt + LT debt
10.
Capital = Debt + Equity
11.
Yield on Corp Bond = Real Rf rate +Expected Inf rate + Maturity P + Liquidity
P+ Credit spread
12.
Yield spread = Liquidity P + Credit spread
13. Return impact for smaller spread )# % )
in price # -Modified Duration ! )Spread
14. Return impact for larger spread ) # % ) in
price # - (Modified D ! )Spread) +
&lConvexity ! ()Spread)2
15. Secured debt leverage =!ûòñù $îíðìîö öî,ò
7dú!ô8
16. Senior unsecured leverage =÷îíðìîö öî,ò'÷îêéûì ðê$îíðìîö öî,ò
7dú!ô8
17. Total Leverage =!ûòñù öî,ò
7dú!ô8
18.
Net Leverage =!ûòñù öî,ò/#ñ$2
7dú!ô8
Reading 57: Derivatives Markets andInstruments
1. Value of the contract to the ‘Long’ at
expiration = ST – F0(T)
2.
Value of the contract to the ‘Short’ at
expiration = F0(T) – ST
3. Margin % in stock market =&+ ûü ÷òûí1/&+ ûü ôî,ò
&+ ûü ÷òûí1
4. Margin Call:
• Long position: Price² that would
trigger a margin call = IM req – MM
req
• Short position: Price( that would
trigger a margin call = IM req – MM
req
5. TED spread = LIBOR – T-Bill rate
6. At expiration (for option Buyer):
• Value of Call option =
cT = Max (0, ST - X)
• Profit from Call option =
Max (0, ST - X) – c0
• Value of Put option = pT =
Max (0, X- ST)
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FinQuiz Formula Sheet CFA Level I 2015
• Profit from Put option =
Max (0, X- ST) – p0
7.
At expiration (for option Seller):
• Profit from Call option =
– Max (0, ST - X) + c0
• Profit from Put option =
– Max (0, X- ST) + p0
8. To eliminate arbitrage opportunity:
Forward Price should be = Spot Price
0 + , > 5;:4 Þ G
Reading 58: Basics of Derivative Pricing &
Valuation
1. Pricing of risky assets = S0 =7 €÷!
&'ì'³ “
2. Commodity = F 0, T = S0 e(r – 2)T where, 2 =
Convenience yield 0 Cost of carry
3. S0 =7 €÷“
&'ì'´ “ – 3 + 4
where, 3 (theta) = Present value of the
costs and 4 (gamma) = Present value of
benefits
4. Arbitrage and Derivatives = Underlying
asset + Opposite position in derivative =
Underlying payoff – Derivative payoff =
Rf return
5.
Pricing and Valuation of Forward
Contracts:
• At Expiration F0 ( T) = S0 (1 + r) T or
S0 = F0 (T) / (1 + r) T
•
Value of forward (long) during
contract life (where t < T) = Vt (T) =
St – F0 (T) / (1 + r)(T – t)
•
Value of forward (short) during
contract life (where t < T ) = Vt
(T) = F0 (T) / (1 + r) (T – t) - St
• Value of forward (long) at expiration
(where t = T) = VT (T) = ST - F0 (T)
•
Value of forward (long) at initiation
(where t = 0) = Vt (0, T) = S0 – F0 (T) /
(1 + r) T
= 0
• Forward price of an asset with benefits
and/or costs = (S0 – 4 + 3) (1 + r) T =
S0 (1 + r)T
– (4 - 3) (1+ r)T
• Value of Forward contract with
benefits and/or costs during the life of
the contract = St – (4 - 3) (1 + r) t - F0
(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 270-day Euro$ T.D and short
position in a 90-day Euro$ T.D
• For synthetic forward position in a 90-
day zero-coupon that begins in 30
days (buy 120-day & sell 30-day zero
coupon bonds)
7. Payoff of Call options:
• At expiration call option = c T = Max
(0, ST –X)
• Profit (call buyer) = Max (0, ST – X) –
c0
• Profit (call seller) = -Max (0, ST – X)
+ c0
8. Payoff of Put options:
•
p T = Max (0, X- ST)
• Profit (put buyer) = Max (0, X-ST) – p0
• Profit (put seller) = - Max (0, X – ST) +
p0
9.
Max Profit/Loss for Option writer/holder:
• Max profit of option seller/writer!
Option premium.
• Max loss of option seller/writer!
unlimited in case of calls; large in case
of puts (bounded by zero).
• Max loss of option holder!Option
premium
Put-Call Parity
10. Protective Put
•
Value PP = p0 + S0
• Payoff at expiration (put out-of-the-
money) = ST.
•
Payoff at expiration (put in-the-
money) = (X-ST) + ST = X.
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FinQuiz Formula Sheet CFA Level I 2015
11. Fiduciary Call
•
Value FC = c0 + X / (1+r) T
• Payoff at expiration (when call out-of-
the-money) = X.
• Payoff at expiration (call in-the-
money) = X + (ST – X) = ST.
12. Put-Call Parity (to avoid arbitrage) = c0 +
X / (1+r) T = p0 + S0
• Synthetic long position in a call =
T r
X S pc
)1(000
+
!+=
• Synthetic long position in a put =
p0= c
0!S
0+
X
(1+ r)T
• Synthetic long position in an
underlying = S 0 = c 0+
X
(1+ r)T ! p0
• Synthetic long position in a riskless
bond = X
(1+ r)T = p
0+S
0 ! c
0
13. Put-Call-Forward Parity = F0(T) / (1 + r) T
+ p0 = c0 + X/(1 + r) T
14.
Valuing a callable bond using Binomial
Model:
•
0
1
0
1 ,S
S d
S
S u
!+
==
• Value at time 0 = V0 = hS0 0 c0
• Value at time 1 will either V1
+ = hS1+ -
c1+ or V1- = hS1- - c1-
• If the portfolio was hedged, then V
+
would equal V-.
• Value of the call =
• Value of the put =
Reading 59: Risk Management Applications of
Option Strategies
1. For Call Option Buyer
• cT = max (0, ST –X)
• When ST + X"cT = 0
• When ST> X"cT = ST – X
• Value at expiration = cT
• Profit = cT – c0
•
Maximum profit = 5! no upper limit
• Maximum loss = c0
• Breakeven = ST* = X + c0
2. For Call Option Seller
• cT = max (0, ST –X)
•
When ST + X"cT = 0
• When ST> X"cT = ST –X
•
Value at expiration = -cT
• Profit = –cT+ c0
• Maximum profit = c0
• Maximum loss = 5! no upper limit
• Breakeven = ST* = X +c0
3. For Put Option Buyer
•
pT = max (0, X - ST)
• When ST< X" pT = X - ST
• When ST " X" pT = 0
•
Value at expiration = pT
• Profit = pT – p0
• Maximum profit = X – p0
• Maximum loss = p0
• Breakeven = ST* = X –p0
4. For Put Option Seller
• pT = max (0, X –ST)
• When ST< X" pT = X – ST
• When ST " X" pT = 0
•
Value at expiration = –pT
• Profit = –pT + p0
• Maximum profit = p0
• Maximum loss = X - p0
• Breakeven = ST* = X - p0
7/24/2019 CFA l 1 Formula Sheet December 2015
http://slidepdf.com/reader/full/cfa-l-1-formula-sheet-december-2015 31/31
FinQuiz Formula Sheet CFA Level I 2015
5. Covered Call = Long stock position +
Short call position
• Value at expiration = VT = ST – max
(0, ST – X)
• When ST + X"VT = ST
• When ST> X"VT = ST - ST +X = X
• Profit = VT – S0 + c0
• Maximum Profit = X – S0 + c0
•
Maximum Loss = S0 – c0
• Breakeven =ST* = S0 – c0
6. Protective Put = Long stock position +
Long Put position
• Value at expiration: VT = ST + max (0,
X - ST)
• When ST + X"VT = ST + X - ST = X
•
When ST> X"VT = ST
• Profit = VT – S0 - p0
• Maximum Profit = 5
•
Maximum Loss = S0 + p0 – X
• Breakeven =ST* = S0 + p0
Reading 60: Introduction to AlternativeInvestments
1. Total Return = Alpha R + Beta R
2. Asset Based Valuation = Co value = Co’s
assets value – Co’s liabilities value
Real Estate Valuation
3. Direct Cap Approach " Valuation of a
property =1Vf
RHSMGHxMµHGMOL NHGI where
NOI = Gross potential income –Estimated
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 =
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
8. Roll yield = Spot price of a commodity –
Futures contract price or
Roll yield = Futures contract price with
expiration date ‘X’– Futures contract price
with expiration date ‘Y.
9.
Returns on a passive investment in
commodity futures
= Return on the collateral + RP or
convenience yield net of storage costs.
10. Sharpe ratio = (Investment return – Rf
return) / S.D. of return
11. Sortino Ratio = (Annualized RoR –
Annualized Rfe rate)/Downside Deviation