FinQuiz Formula Sheet CFA Level I 2015

Reading 5: Time Value of Money EAR (with Continuous Compounding) $% /$g ' h%
3. HPR =
$g
= EAR = (- 1
1. Interest Rate (i) R![
*
i = Real Rf + Inf P + Default Risk 5. PV & FV of Ordinary Annuity 4. MWR = M\d &'fNN [ d = 0 (IRR
%
P + Liquidity P + Maturity P $)*
&/
%_` #
represents the MWR)
L
Nominal Rf i rate = Real Rf i Rate + PVOA = G\& &'( [ =
(
Inf P 5. TWR:

i rate as a growth rate = g =

%
!"# #
-1
FVOA = L
G\& [PMT (1 + r ) ]
t
N t
= TWR (when no external CF) = rTWR =
)"% /)"g
$" &'( # /& HPR = rt =
)"g
(
2. PV and FV of CF = Size of Annuity Payment = PMT = TWR (for more than one periods) =
!" $" rTWR = [(1+rt,1) (1+rt,2) (1+rt,n)] -1
PV =
&'( # $" OQ KLLTMGa !HbGO( Annualized TWR (when investment is
$)* %
PV of Perpetuity = &/

( %_
`- c# for more than one year)
c
PV (for more than one Compounding PV of Annuity Factor = `- = 1 + & 1 + l +
c
%
(- /.1
per year) = PV= FVN 1 + 1 + L n
_1
.
6. PV & FV of Annuity Due
7 = %
TWR (for the year when valuation is
&/
%_` # daily) = rTWR = [(1+R1) (1+R2)
FVN = 1 + 1 PVAD = + PMT at t = 0
( )"% /)"g
FV (for more than one Compounding (1+R365)] -1 where R1 =
)"g
(- .1
= PVOA + PMT
per year) = FVN = PV 1 + FVAD =
.
6. Bank Discount Yield = BDY = rBD =
FV (for Continuous Compounding) = (1 + r )N 1 N pqd $H(/$(MbI
therefore Price = Par 1
FVN = (-1 PMT (1 + r ) = L $H(
B1
CD
r L (rs
ED
Solving for N = (where LN = pqd
( FVOA (1+r)N
natural log)
$% /$g ' h%
Reading 6: Discounted Cash Flow Applications 7. Holding Period Yield = HPY =
$g
4. Stated & Effective Rates
Periodic i Rate = L R![
8. Effective Annual Yield = EAY = 1 +
FGHGIJ KLL M NHGI
1. NPV = G\d &'( [ d
1O. OQ RO.SOTLJMLU $I(MOJ7 ML VLI WIH( pqv/G 1 (Rule: EAY > BDY)
Effective (or Equivalent) Ann Rate 2. IRR (when projects CFs are perpetuity) =
(EAR = EFF%) = 1 + R! 9. Money Market Yield (or CD equivalent
NPV = - IO + =0 Yield) rMM:
. 1 fNN
pqd
rMM = HPY
G
 FinQuiz Formula Sheet CFA Level I 2015

8. Median = Middle No (when observations hM7G(M}TGMOL

rMM = (rBD) Deciles = ,
!HbI "HxTI OQ GyI *(IH7T(a zMxx &d
are arranged in ascending/descending
$T(byH7I $(MbI Position of a percentile = Ly =
pqd (rs
order) a
rMM = (Rule: rMM> +1
pqd/ G (rs For Even no of obvs locate &dd
L
rBD) median at mean of and
l
10. Bond Equivalent Yield = BEY = (L'l)
16. Mean Absolute Deviation = MAD =
n
% [ /
Semiannual Yield 2 l
L
For Odd no. of obvs locate #
% /
Reading 7: Statistical Concepts & Market median at
L'&
position 17. Population Var = 2 =
1
l
Returns # /
%
18. Population S.D = l =
9. Mode = obvs that occurs most frequently 1
1. Range = Max Value Min Value in the distribution n
% /
19. Sample Var = s2 =
{/B L L/&
2. Class Interval = i = where 10. Weighted Mean = = M\& M M =
|
i = class interval (w1X1+ w2X2+.+ wnXn) n /
%
20. Sample S.D = s =
H = highest value L/&
n
L = lowest value, k = No. of classes. 11. Geometric Mean = GM = & l L
with Xi0 for i = 1,2,n. /
21. Semi-var = !O( Hxx L/&
3. Absolute Frequency = Actual No of
L
Observations (obvs) in a given class 12. Harmonic Mean = H.M = { = n % 22. Semi-deviation (Semi S.D) =
interval %

/
= !O( Hxx
n L/&
K}7OxTGI !(I~TILba
4. Relative Frequency = 13. Population Mean = = where N is the
*OGHx 1O OQ V}7 1
number of observations in the entire /z
23. Target Semi-var = !O( Hxx z L/&
5. Cumulative Absolute Frequency = Add up population and Xi is the ith observation
where B = Target Value
the Absolute Frequencies
n

14. Sample Mean = = where n = 24. Target Semi-Deviation =
L
6. Cumulative Relative Frequency = Add up
number of observation in the sample =
the Relative Frequencies
/z
FT. OQ O}7 ML JHGH}H7I
15. Measures of Location: !O( Hxx z L/&
7. Arithmetic Mean = hM7G(M}TGMOL
1O.OQ O}7 ML GyI JHGH}H7I Quartiles =

hM7G(M}TGMOL
Quintiles =
v
 FinQuiz Formula Sheet CFA Level I 2015

F P(A or B) = P(A) + P(B) P(AB)

25. Coefficient of Variation = CV =

P(A or B) = P(A) + P(B) (when events are 12. Portfolio Var = 2 (Rp) =
where s= sample S.D and = sample L L
mutually exclusive because P(AB) = 0) M\& \& M M
mean
2 (Rp) = &l l & + ll l l +
)IHL $O(GQOxMO N /)IHL NQ N
7. Independent Events: pl l p + 2& l & , l +
26. Sharpe Ratio = Two events are independent if:
F.h OQ $O(GQOxMO N
2& p & , p +
P(B|A) = P(B) or if P(A|B) = 2l p l , p
27. Excess Kurtosis = Kurtosis 3 P(A)
13. Standard Deviation (S.D) = l $
Multiplication Rule for two
28. Geometric Mean R independent events = P(A & B) =
"H(MHLbI OQ N 14. Correlation (b/w two random variables Ri,
P(AB) = P(A) P(B) RO N N
l
Multiplication Rule for three Rj) = M =
N N

Reading 8: Probability Concepts independent events = P(A and B

and C) = P(ABC) = P(A) P(B) 15. Bayes Formula =
1. Empirical Prob of an event E = P(E) = P(C) | =
$(O} OQ IILG $ 1I fLQO(.HGMOL|ILG

*OGHx $(O} 8. Complement Rule (for an event S) = P(S) $ 1I fLQO(.HGMOL

+ P(SC) = 1 (where SC is the event not S) .

$(O} OQ
2. Odds for event E =
&/$(O} OQ
9. Total Probability Rule: 16. Multiplication Rule of Counting = n
&/$(O} OQ P(A) = P(AS) + P(ASC) = P(A|S)P(S) + factorial = ! = n (n-1)(n-2)(n-3)1.
3. Odds against event E =
$(O} OQ P(A|SC)P(SC)
P(A) = P(AS1) + P(AS2) +.+ P(ASn) = 17. Multinomial Formula (General formula for
4. Conditional Prob of A given that B has P(A|S1)P(S1) + P(A|S2)P(S2) + labeling problem) =
L!
$ Kz L% !L !L !
occurred = P(A|B) = P(B) 0. P(A|Sn)P(Sn)
$ z
18. Combination Formula (Binomial Formula)
5. Multiplication Rule (Joint probability that (where S1, S2, ,Sn are mutually exclusive L L!
= L( = =
both events will happen): and exhaustive scenarios) ( L/( !(!

10. Expected R = E(wiRi) = wiE(Ri) where n = total no. of objects and r = no.
P(A and B) = P(AB) = P(A|B) P(B)
of objects selected.
P(B and A) = P(BA) = P(B|A) P(A)
11. Cov (Ri Rj) = M M
L!
6. Addition Rule (Prob that event A or B will Cov (Ri Rj) = Cov (Rj Ri) 19. Permutation = L( =
L/( !
occur): Cov (R, R) = 2 (R)
 FinQuiz Formula Sheet CFA Level I 2015

Reading 9: Common Probability Distributions More precise intervals for 95% of the Rt, t+1 = holding period return on the stock
obvs are 1.96 and for 99% of the from t to t + 1.
1. Probability Function (for a binomial observations are 2.58.
random variable) p(x) = p(X=x) = 13. Continuously compounded return
L L/ L! associated with a holding period from t to t
1 == 1 5. Z-Score (how many S.Ds away from the
L/ !!
mean the point x lies) = + 1:
L/ (for x = 0,1,2.n)
=
x = success out of n trials

/
(when X is normally distributed) rt, t+1= ln(1 + holding period return) or
n-x = failures out of n trials
rt, t+1 = ln(price relative) = ln (St+1 / St) = ln
p = probability of success (1 + Rt,t+1)
1-p = probability of failure 6. Roys Safety-Frist Criterion = SF Ratio =
NE /N
n = no of trials. E 14. Continuously compounded return
associated with a holding period from 0 to
2. Probability Density Function (pdf) = f(x) NE /N T:
& 7. Sharpe Ratio = =
E
= }/H =
0 r0,T= ln (ST / S0) or d,* = */&,* +
/H 8. Value at Risk = VAR = Minimum $ loss
F(x) = < < (cumulative */l,*/& + + d,&
}/H
expected over a specified period at a
distribution)
specified prob level. Where,
3. Normal Density Funct = = rT-I, T = One-period continuously
9. Mean (L) of a lognormal random variable compounded return
& /(/)
for < < + = exp ( + 0.502)
l l

15. When one-period continuously

4. Estimations by using Normal Distribution: 10. Variance (L2) of a lognormal random compounded returns (i.e. r0,1) are IID
variable = exp (2+ 2) [exp (2) 1]. random variables.
Approximately 50% of all obsv fall in
the interval
l 11. Lognormal Price = ST = S0exp (r0,T)
p
d,* = */&,* + */l,*/& +
Where, exp = e and r0,t = Continuously
Approx 68% of all obvs fall in the + d,& = And
compounded return from 0 to T
interval
Approx 95% of all obvs fall in the 12. Price relative = End price / Beg price = = l d,* = l
interval 2 St+1/ St=1 + Rt, t+1
Approx 99% of all obvs fall in the S.D. = (r0,T) =
interval 3 where,
 FinQuiz Formula Sheet CFA Level I 2015

16. Annualized volatility = sample S.D. of CI for normally distributed population /g

3. = (when sample size is large or

one period continuously compounded with known variance = H/l n
L
returns small but pop S.D is known)
CI for normally distributed population
F
with unknown variance = H/l /g
Reading 10: Sampling and Estimation L 4. = - (when sample size is large but
where S = sample S.D. n
pop S.D is unknown where s is sample
1. Var of the distribution of the sample mean
7. Students t distribution S.D)
= F
L
= H/l
2. S.D of the distribution of the sample mean L
5. L/& =
/g
(when sample size is large or
-
n
=
L X small and pop S.D is unknown and
8. Z-ratio = z= popsampled is normally or approximately
n
3. Standard Error of the sample mean: normally distributed)
When the population S.D () is known X
9. t-ratio = t= 6. Test Statistic for a test of diff b/wtwo pop
= = s n
L
means (normally distributed, pop var
When the population S.D () is not
7 unknown but assumed equal)
known = = where s = sample Reading 11: Hypothesis Testing
L
% / / % /
S.D estimate = = t= where Sl = pooled
n
1. Test Statistic =

%/
% / '
l l = / n% n
L/&
estimator of common variance =
L% /& F% ' L /& F
4. Finite Population Correction Factor = fpc *
when Pop S.D is unknown, the standard where = & + l
L% ' L /l
1/L error of sample statistic is given by =
= where N= population size 2.
1/& F

L
7. Test Statistic for a test of diff b/w two pop
5. New Adjusted Estimate of Standard Error
*
when Pop S.D is known, the standard means (normally distributed, unequal and
= (Old estimated standard error fpc)
error of sample statistic is given by = unknown pop var)

6. Construction of Confidence Interval (CI) =
L
Point estimate (Reliability factor
Standard error) 2. Power of Test = 1-Prob of Type II Error
 FinQuiz Formula Sheet CFA Level I 2015

% / / % / L/& F
t= %/
In this df calculated as Lower limit = L = and Upper limit

% ' / Reading 12: Technical Analysis
n% n
L/& F
% ' =U=
n% n

%/ 1. Relative Strength Analysis =
=

%
n% n
'
n% n 10. F-test (test concerning differences between
variances of two normally distributed 2. Price Target for the
8. Test Statistic for a test of mean differences F% Head and Shoulders = Neckline
populations) F =
(normally distributed populations, F (Head Neckline)
unknown population variances) Inverse Head and Shoulders =
&l = 1 & & &l Neckline + (Neckline Head)
=
J/g = 2 l
FJ
& = & 1 ' ' .'
sample mean difference = = 3. Simple Moving Average =
l = l 1
& L
M\& M
L
n
% J /J

11. Relation between chi-square and F- 4. Momentum Oscillator (or Rate of Change
sample variance = Jl =
L/& % Oscillator ROC):
sample S.D = Jl distribution = = . where:

L
sample error of the sample mean Momentum Oscillator Value M = (V-
F &l is one chi-square random variable
difference = J = Vx) 100
L with one m degrees of freedom (where V = most recent closing price
ll is another chi-square random and Vx = closing price x days ago)
8. Chi Square Test Statistic (for test variable with one n degrees of Alternate Method to calculate M =
concerning the value of a normal freedom "
l L/& 7 100
populations variance) = "
g
12. Spearman Rank Correlation = 7
where 1 = l = 5. Relative Strength Index = RSI = 100
n 6 LM\& Ml
% / =1 &dd
= l 1 where
L/& &'NF
For small samples rejection points for RS =
9. Chi Square Confidence Interval for the test based on 7 are found using S byHLUI7 JT(MLU bOL7MJI(IJ SI(MOJ
variance table. hOL byHLUI7 JT(MLU bOL7MJI(IJ SI(MOJ

For large sample size (e.g. n>30) t-test

can be used to test the hypothesis i.e. 6. Stochastic Oscillator (composed of two
lines - %K and %D):
2 &/l 7
=
1 7l &/l
 FinQuiz Formula Sheet CFA Level I 2015

R/B& Area (for calculating Consumer 9. Arc Elasticity of Demand =

% = 100 where:
{&/B&
Surplus) = (Base Height) = [Qd %
C = latest closing price, L14 = lowest %
(Price intercept P1)]
price in last 14 days, H14 is highest Q2 Q1
price in last 14 days
4. Producer Surplus = Total revenue received %Q (Q1 + Q2 ) 1
2
%D = Average of the last three %K =
values calculated daily.
from selling a given amount of a good %P P2 P1
Total variable cost of producing that
2 ( P1 + P2 )
1
amount
7. Put/Call Ratio (Type of Sentiment

Indicators) = 10. Income Elasticity of Demand =
Total revenue = Total quantity sold %
Price per unit =
%
8. Short Interest Ratio (Type of Sentiment Area (for calculating Producer Q x d

Indicators) = Surplus) = (Base Height) = d
%Q x Qd x
{(Q0) (P0 intercept point on y- =
axis**)} %I I
9. Arms Index or TRIN i.e. Trading Index I
(Type of Flow of funds Indicator) =
**where supply curve intersects y-axis
= 11. Cross Elasticity =
1O.OQ KJHL f77TI7 1O.OQ hIbxML f77TI7
5. Total Surplus = Consumer surplus + %
"OxT.I OQ KJHL f77TI7"OxT.I OQ hIbxML f77TI7
%
Producer surplus
Reading 13: Demand & Supply Analysis:
Introduction 6. Total Surplus = Total value to buyers Reading 14: Demand & Supply Analysis:
Total variable cost Consumer Demand
1. Slope of the demand curve =
7. Society Welfare =Consumer surplus + ! "
1. Marginal Utility =
Producer surplus #$

2. Slope of the supply curve = 2. Equation of Budget Constraint Line = (PX

8. Own-Price Elasticity of Demand =

d d QX) + (PY QY)
%Q x Q x Px
E d px = = d
3. Consumer Surplus = Value that a
%Px Px Q x 3. Slope of Budget Constraint Line =

,
%
consumer places on units consumed where X and Y is measured on the
Price paid to buy those units horizontal and vertical axis, respectively.
 FinQuiz Formula Sheet CFA Level I 2015

% 19. Break-even price: P = ATC Output

4. Marginal Rate of Substitution = = = Sum of individual units sold

&' "
Respective prices of individual Units level where Price = Average Revenue =
&' " sold = (Pi Qi) Marginal Revenue = Average Total Cost
where, Total Revenue = Total Cost.
! )*
Reading 15: Demand & Supply Analysis: The 9. Average Revenue (AR) =

Firm 20. Firms earn Economic Profits when Price >
Average Total Cost
! )*
1. Profit = Total revenue Total cost 10. Marginal Revenue (MR) =

21. Profits occur when Total Revenue (TR)
2. Accounting Profit = Total Revenue 11. Total Variable Cost = Variable Cost per Total Cost (TC) & when Price = Marginal
Explicit Costs(or Accounting costs) unit Quantity Produced revenue firm will continue operating.

3. Economic Profit 12. Total Cost = Total Fixed + Total Variable 22. Losses are incurred when there are
= Total Revenue Explicit Costs Operating profits (Total Revenue
Implicit Costs or 13. Average total cost (ATC) = Variable Cost) but Total Revenue < Total
= Accounting Profit Implicit Costs ! #$ Fixed Cost + Total Variable Cost AND
= Avg. Fixed Cost + Avg.
when Price = Marginal Revenue while
or
Variable Cost losses are < fixed costs firm will
= Total Revenue Total Economic
Costs continue operating.
! #$
14. Marginal cost (MC) =

4. Economic costs = Explicit costs + Implicit 23. Losses are incurred when there are
costs 15. Marginal Variable Cost = Operating losses (Total Revenue <
5. Normal Profit = Accounting Profit ! +, #$ Variable Cost) AND when losses=
Economic Profit
fixed costs firm will shut down.

16. Marginal revenue (in perfect competition) !

6. Accounting profit = Economic Profit + 24. Average Product =
= Avg. Revenue = Price regardless of -,
Normal Profit
Demand
!
25. Marginal Product = =
7. Economic rent = (New Higher Price -,
17. Profit can be increased by increasing ! .
after in Demand Previous Price before
output when MR> MC / 01$
in Demand) QS before in Demand

18. Profit can be increased by decreasing

8. Total Revenue (TR):
output when MR< MC
= Price Quantity or
 FinQuiz Formula Sheet CFA Level I 2015

26. Least-cost optimization Rule: Reading 17: Aggregate Output, Prices & unincorporated business net income + rent
&' -, Economic Growth + indirect business taxes less subsidies
=
-,
&' 2$ #
1. Nominal GDP t = Prices in year t 10. Total Amount Earned by Capital = Profit +
2 #
Quantity produced in year t Capital Consumption Allowance
27. Profit is maximized when: MRP = Price or
cost of the input for each type of resource 2. Real GDP t = Prices in the base year 11. PI = National income Indirect business
that is used in the production process Quantity produced in year t taxes Corp income taxes Undistributed
Corp profits + Transfer payments
28. Marginal Revenue product = Marginal 3. Implicit price deflator for GDP or GDP
Product of an input unit Price of the deflator = 12. Personal disposable income (PDI) =
Product = Value of the input to firm = * $ Personal income Personal taxes OR GDP

! )* * ,$ $
(Y) + Transfer payments (F) (R/E +
100
Depreciation) direct and indirect taxes
(R)
29. Surplus value or contribution of an input to 4. Real GDP = [Nominal GDP / (GDP
firms profit = MRP Cost of an input deflator 100)]
13. Business Saving = R/E + Depreciation

Reading 16: The Firm & Market Structures /

5. GDP deflator = 100 14. Household saving = PDI - Consumption
)
expenditures - Interest paid by consumers
1. In perfect competition, Marginal revenue =
6. GDP = Consumer spending on final good to business - Personal transfer payments to
Avg. Revenue = Price regardless of level
&services + Gross private domestic invst + foreigners
of Demand
Govt. spending on final goods &services +
Govt. gross fixed invst + Exp Imp + 15. Business sector saving = Undistributed
2. Marginal Revenue = Price 1 Statistical discrepancy corporate profits + Capital consumption

& allowance
7$
7. Net Taxes = Taxes Transfer payments
3. Concentration Ratio = 16. Total Expenditure = Household
8. GDP = National income + Capital
$$ *$ 2 '$ / $
! &1 $ consumption allowance + Statistical consumption (C) + Investments (I) +
discrepancy Government spending (G) + Net exports
4. Herfindahl-Hirshman Index = Sum of the (X-M)
squares of the market shares of the top N 9. National Income = Compensation of
companies in an industry employees + Corp & Govt enterprise 17. Private Sector Saving = Household Saving
profits before taxes + Interest income + + Undistributed Corporate Profits +
Capital Consumption Allowance
 FinQuiz Formula Sheet CFA Level I 2015

18. GDP = Household consumption + Private (Relative share of capital in National 3. Narrow money = M1= notes and coins in
Sector Saving + Net Taxes Income Growth in capital] circulation + other very highly liquid
deposits
19. Domestic saving = Investment + Fiscal 28. Capital share =Corporate profits + net
balance + Trade balance interest income + net rental income + 4. Broad money = M2 = M1 + entire range of
(depreciation/ GDP) liquid assets available to make purchases
20. Trade Balance = Exports Imports
7 #$ 5. M3 = M2 + other liquid assets
29. Labor share =

21. Fiscal balance = Government Expenditure
Taxes = (Savings Investment) Trade 6. Quantity Theory of Money = M V = P
Reading 18: Understanding Business Cycles
Balance Y where,
22. Average propensity to consume (APC) = M = Quantity of money
8''' #$
1. Price index at time t2 =
"HxTI OQ GyI RO.7T.SGMOL zH7|IG HG G V = Velocity of circulation of money
) 100 P = Average price level
"HxTI OQ GyI ROL7T.SGMOL zH7|IG HG G%
9 Y = Real output
23. Quantity theory of money equation: Inflation Rate = 1
&dd
Nominal Money Supply Velocity of
7. Neutral Rate = Trend Growth + Inflation
Money = Price Level Real Income or 2. Fisher Index = (where, IL =
Target
Expenditure Laspeyres index and Ip = Paasche Index)
8. Impact of Taxes and Government
24. % in unit labor cost = % in nominal 3. () = Spending: The Fiscal Multiplier
wages - % in productivity ! , $ 2 <1
. 2 <1
The net impact of the government sector
on AD:
25. Economic growth = Annual % in real
/ G T + B = Budget surplus or Budget
GDP 4. Velocity of money =
& deficit
where, G = government spending , T
26. Total Factor Productivity growth = Growth Reading 19: Monetary & Fiscal Policy =taxes, B =transfer benefits
in potential GDP [Relative share of labor
Disposable income = National Income
in National Income (Growth in labor) + 1. Total Money created = New deposit/ Net taxes = (1 t) National Income
[Relative share of capital in National Reserve Req where, Net taxes = taxes transfer
Income (Growth in capital)]
payments, t = net tax rate
2. Money Multiplier =
27. Growth in potential GDP = Growth in &
9. Fiscal Multiplier (in the absence of taxes)
technology + (Relative share of labor in )$* )C $*
= 1/(1 - MPC)
National Income Growth in Labor) +
MPS = 1 MPC.
 FinQuiz Formula Sheet CFA Level I 2015

Total increase in income and spending 4. Net welfare effect = consumers surplus
= Fiscal multiplier G loss + producers surplus gain + Govt. 4. Change in Real Exchange rate =
UR
revenue S/R &'
UR
10. Fiscal Multiplier (in the presence of taxes) 1 + U 1
S/R &' S
US
5. Closed Economys output = Y = C+I+G
MPC (with taxes) = MPC (1 - t) &
& 6. Open Economys output = Y = 5. Direct Quote =
Fiscal multiplier =
&/)$R &/G
C+I+G+(X-M) 6. Points on a forward rate quote = Fwd X-
Total in income and spending =
Current Account Balance = X-M = Y- rate quote Spot X-rate quote
Fiscal multiplier G
C+I+G
Initial in consumption due to V< $
7. Forward rate = Spot X-rate +
reduction in taxes = MPC tax cut 7. Consumption = Income + transfers taxes &d,ddd
amount saving
Total or cumulative effect of tax cut = 8. Forward premium/discount (in %) =
$ /'(< $/&d,ddd)
multiplier initial change in d
C = Y - Sp =Y+R-T-Sp And, 1
$ /
consumption CA = Sp- I+ Govt surplus (or Govt saving)
= Sp- I+ (T- G- R) 9. To convert spot rate into a forward quote
11. Cumulative multiplier = Restated differently, Sp + Sg = I + CA
* * 2 < $
(when points are represented as %) = Spot
% OQ Dh$ exchange rate (1 + % premium or
where, Sg = Govt savings discount)
Reading 20: International Trade & Capital Sp = I + CA Sg
Flows Current Account Imbalance CA = Sp 10. Arbitrage relationship is stated as follows:
+ Sg I
&
9$ 1 + J = 1 + Q
1. Terms of trade =
!
$ Reading 21: Currency Exchange Rates
In case of indirect quote, Arbitrage
2. Terms of Trade (as an index number) = 1. Foreign price level in domestic currency = relationship is: 1 + J =
8*' 9$ 1/Q/J 1 + Q Q/J
S/ P
8*' $
&'M
=

&'M
3. Net exports = Value of a country's exports 2. Real exchange rate(/) = (S P )/P =
Forward rate as a % of spot rate =
imports S (P /P ) !/ &'M
=
F/ &'M
3. Real Exchange Rate $/' =
#R
S/
#S
 FinQuiz Formula Sheet CFA Level I 2015

11. Return on hedged foreign investment M=share of imports

(with a quoted forward rate) = Q/J 1 + M =price elasticity of domestic country Reading 25: Understanding Income Statements
& demand for imports
Q
!/ 1. Revenue recognized on Prorated basis =
17. Trade balance = Income (GDP) ! 8 #$
! 2
12. Expected % change in the spot rate = Domestic expenditure = Absorption
F[_% M /M
1 = %G'& = 2. Revenue recognized under Percentage-of-
F[ &'M
Reading 22: Financial Statement Analysis: An
Completion Method = % of Total cost
Introduction
Forward points: Q/J Q/J = spent by the firm Total Contract
M /M Revenue
Q/J (where is quoted 1. Gross Profit = Revenue Cost of sales
&'M X
interest rate period) 3. Revenue recognized when outcome cannot
2. Operating Profit or EBIT = Gross profit
be reliably measured
Operating costs + Other operating income
13. Relationship between the trade balance and under IFRS, Revenue= Contract costs
expenditure/ saving decisions: incurred under US GAAP, no revenue
3. Profit before tax = EBIT + non-operating
= Ex Im = (Sav Inv) + (T G) reported until contract is complete
income Interest expense
where T= taxes net of transfers
4. Profit after tax = Profit before tax
G= government expenditures)
Income tax expense 4. Revenue recognized under installment

method = Cash receipt
14. Price elasticity of demand = = $
% 2' C % Reading 23: Financial Reporting Mechanics 5. Wgtd Avg cost per unit =
=
% 2' % ! #$ $ *,
1. Owners Equity = Contributed Capital + ! $ *,

15. Expenditure (R) = Price Quantity = P R.E

Q 6. COGS using Wghtd Avg Cost = No of
% in expenditure = % R = % P 2. End R.E = Beg R.E + Net income units sold Wghtd Avg cost per unit
+ % Q = (1- ) % P Dividends
7. COGS using LIFO = Total cost Value of
16. Basic idea of Marshall-Lerner condition = 3. Assets = Liabilities + Contributed Capital ending inventory
+ ) ) 1 > 0 where, + Beg R.E + Revenue Expenses
Dividends 8. Annual Depreciation Expense (using
#$/)$ +
x=share of exports Straight-Line Method) =
7$ "$ -
X=price elasticity of foreign demand for Reading 24: Financial Reporting Standards
domestic country exports
 FinQuiz Formula Sheet CFA Level I 2015

9. Annual Depreciation Expense (Declining 1. Percentage of A/C Receivable estimated to 9. Vertical common-size balance-sheet =
&dd% be uncollectible = d $2 8
balance method) = Acceleration
"$ 8< , 8/# ! 8$$$
factor (say 200% or 2) Net Book Value $$ 8/# )*,
# 8$$$
10. Current ratio =
/ / *$ # -,$
10. Basic EPS = 2. Net Identifiable Assets = Fair value of
0'2 8*' / $2$ $'
identifiable assets Fair value of liabilities 11. Quick (acid test) =
& contingent liabilities #$2'&1, $$')*,$
11. Diluted EPS for preferred stock =
/ # -,$
0'2 8*' / $2$ /$'/< $2$ 2 3. Amortized cost of PPE = Historical cost
< 2* , $$ *$ #$2'&1, $$
Accumulated depreciation Impairment 12. Cash ratio =
# -,$
losses
12. Diluted EPS for convertible debt =
/ '8! M 13. Long-term debt-to-equity =
*, ,/ *
0'2 8*' $2$ /$'8 $2$ 4. Carrying value for PPE under revaluation ! '/ ,
2 < 2* , $$ *$ model ! 7C

= Fair value at date of revaluation

13. Diluted EPS using Treasury Stock Method ! ,
Accumulated depreciation (if any) 14. Debt-to-Equity =
! 7C
=
(Net Income Preferred dividends) 5. Amortized cost of PPE = Historical cost ! ,
[Wght Avg No. of shares + 15. Total Debt =
Accumulated depreciation Impairment ! 8$$$
(New shares at option exercise
losses
Shares purchased with ! 8$$$
16. Financial Leverage =
Cash received upon exercise ) ! 7C
6. Carrying value for PPE under revaluation
(Proportion of Yr)]
model Reading 27: Understanding Cash Flow
/ = Fair value at date of revaluation Statements
14. Net Profit Margin = Accumulated depreciation (if any)
)*

$$
1. End Cash = Beg cash + Cash receipts
15. Gross Profit Margin = 7. Deferred tax liability = Taxable income < (from operating, investing, and financing
)*
Reported Financial Statement Income activities) Cash payments (for operating,
16. Comprehensive EPS = EPS + Other before taxes investing, and financing activities)
Comprehensive Income per share
8. Deferred tax liability = Actual income tax 2. End A/c Receivable = Beg A/c Receivable
Reading 26: Understanding Balance Sheets payable in a period < Income tax expense + Revenues Cash collected from
customers
 FinQuiz Formula Sheet CFA Level I 2015

3. Cash received from customers = Revenue 13. Cash paid for income taxes = Income tax
Increase in a/c receivable expense Increase in income tax payable #V.
24. Cash to income =
.'

4. Purchases from suppliers = COGS + 14. Historical cost of equipment sold = Beg
25. Cash flow per share =
Increase in inventory balance equipment + Equipment purchased #V./ *$
End balance equipment / $2$ /$
5. Cash paid to suppliers = Cogs + Increase
in inventory Increase in a/c payable 15. Accumulated Dep on equipment sold = 26. Debt Coverage =
#V.
! ,
Beg. balance accumulated dep + Dep
27. Interest Coverage =
6. End Inventory = Beg inventory + expense End. balance accumulated dep #V.'$ '!9$
Purchases COGS $
16. Cash received from sale of equipment = 28. Reinvestment =
#V.
#$2 '/ $$$
7. End a/c payable = Beg a/c payable + Historical cost of equipment sold
Purchases Cash paid to suppliers Accumulated dep on equipment sold +
gain on sale of equipment 29. Debt payment =
#V.
8. Cash paid to employees = Salary and #$2 -! ,
wages expense Increase in salary and 17. Dividends paid = Beg balance of R.E +
wages payable Net income End balance of R.E #V.
30. Dividend payment =
*$

9. End salary and wages payable = Beg salary 18. FCFF = Net income + Non-cash charges +
and wages payable + Salary and wages Interest expense (1 tax rate) Cap exp 31. Investing and Financing =
#V.
expense cash paid to employees WC expenditures #$2 <$ *$' ' *$

10. Cash paid for other operating expenses = 19. FCFF = CFO + Interest expense (1 Tax Reading 28: Financial Analysis Techniques
Other operating expenses Decrease in rate) Cap exp
prepaid expenses Increase in other 1. Compound Growth Rate =
accrued liabilities 20. FCFE = CFO Cap exp + Net borrowing %
7 + fg gR hijkgSl
1
d' +
11. Cash paid for interest = Interest expense + #V.
21. CF to revenue =
/ )*
Decrease in interest payable -$$$ 79$$
2. Combined ratio =
#V. / 7
22. Cash ROA =
12. End Interest Payable = Beg interest 8*' ! 8$$$
payable + Interest expense Cash paid for .'
3. Operating ROA =
#V. 8*' ! 8$$$
interest 23. Cash ROE =
8*' $22$e C
 FinQuiz Formula Sheet CFA Level I 2015

/
4. ROA = or
8*' ! 8$$$ / $
14. No of Days of Payables = 24. Coefficient of Variation of Revenues =
ROA = ,$ !* . )*
/ '$ 79$ &/!9
8*' )*
8*' ! 8$$$ )*
15. WC Turnover =
8*' 0#
!9
25. Monetary Reserve Requirement (Cash
5. Effective Tax Rate = )$*$ 2 $ # d1
7'$ , !9 )* Reserve Ratio) =
16. Fixed Asset Turnover = $ -,$
8*' / V9 8$$$
6. Vertical common size income statement =
$ )*
26. Liquid Asset Requirement =
17. Total Asset Turnover = ) &1, $
)* 8*' ! 8$$$
$ -,$

7. Horizontal common size balance sheet = 18. Pretax margin =

d $2 l 7'$ , 9 , $
27. Net Interest Margin =
d $2 & / $
)*
! $ 7' 8$$$

8. Inventory turnover = 19. Return on Total Capital =

#$ $$ $ '$ $ 7d! 28. Sales per Square Meter =
8*' * 2 ' , C )*
! ) C &$

9. Days of Inventory on Hand (DOH) = /

20. ROE = ) )*
/ $ 8*' ! 7C 29. Average Daily Rate =
/ )$ $
* !* ROE = ROA Leverage
ROE = Tax Burden Interest Burden / )$
)* 30. Occupancy Rate =
10. Receivables Turnover = EBIT Margin Total Asset / )$ *,
8*' )*,$
Turnover Leverage
7d!
31. EBIT Interest Coverage =
11. Days of Sales Outstanding (DSO) $$ $
/ $ 21. Return on Common Equity =
= / / *$
)*,$ * 7d!8
8*' # 7C 32. EBITDA Interest Coverage =
$$ $
12. Avg A/c Receivable Balance = Avg Days
Credit Sales DSO or 22. Coefficient of Variation of Operating 33. FFO Interest Coverage =
. .' VV.'$ /.' -$ 8s$$
Avg A/c Receivable Balance = Income =
8*' .' $$ $
$ $
= mno
)*,$ !*
pqr 7d!
23. Coefficient of Variation of Net Income = 34. Return on Capital = =
. / 8*' #
2$ 7d!
13. Payables turnover = 8*' /
8*' ,$ 8*' (7C'/ 9$',)
 FinQuiz Formula Sheet CFA Level I 2015

VV. 1. NRV = Estimated Selling Price Where, Recoverable amount = Max [(Fair
35. FFO to Debt =
! ,
Estimated Costs of completion and value Costs to sell); Value in Use)] and
#V./# 79 disposal Value in use = PV of Expected Future CFs
36. Free Operating CF to Debt =
! ,
2. Inventory amount net of valuation 6. Impairment Loss (US GAAP) = Assets
37. Discretionary CF to Debt = allowance = Carrying amount of Inventory Fair Value Carrying Amount .If
#V./# 9/*$
Write downs Carrying amount > Undiscounted Expected
! ,
Future Cash Flows
38. Net CF to Capital expenditures = 3. (NRV Normal Profit Margin) MV
VV./*$ NRV Reading 31: Income Taxes
# 9

Reading 30: Long-Lived Assets 1. Deferred tax asset = Companys taxable

!
,
39. Debt to EBITDA = income > Accounting profit
7d!8
1. Dep Exp under Straight-line Method =
,
#$ 2. Tax base of revenue received in advance =
40. Total Debt to total debt plus Equity = =
7$
"$
-
!
, t$
#$/7$
)$
$*' + Carrying amount Any amount of revenue
!
,'7C 7$
"$
- that will not be taxed at a future date
2. Dep Exp under Units-of-Production 3. Reported Effective Tax Rate =
#8/#- ).7 Method = Depreciable Cost
!9
9$
41. Z-Score = 1.2 + 1.4 +
!8 !8

2


9


8'

7d! &+

$1
3.3 + 0.6 + 1.0 7$
*
#

!8 d+

,$
$ 4. Deferred tax liability = Carrying amount

!8 3. Carrying amount under cost model = of asset > Tax base of asset
Historical Cost Accumulated Dep or
'

(-$$)
42. Segment margin = Amortization 5. Deferred tax asset = Carrying amount of
'
)*
asset < Tax base of asset
'
)* 4. Carrying amount under revaluation model
43. Segment turnover =
'
8$$$ = Fair value at the date of revaluation 6. Deferred tax asset = Carrying amount of
Any subsequent Accumulated Dep or liability > Tax base of asset
'

(-$$) Amortization
44. Segment ROA =
'
8$$$
7. Deferred tax liability = Carrying amount of
'
-,$
5. Impairment Loss (IFRS) = Recoverable liability < Tax base of asset
45. Segment Debt Ratio = Amount Net Carrying Amount
'
8$$$
8. Companys tax expense (or credit)
Reading 29: Inventories reported on its income statement = Income
 FinQuiz
tax liability currently payable + in
deferred tax asset / liability
Where,
Income Tax liability currently
payable = Taxable income Tax
rate
in 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 companys 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
Formula Sheet
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 Discount
7. Total Interest Expense (in case of
premium) = Periodic interest payments -
Amortization of Premium
8. Amount of Bonds payable reported on the
balance sheet = Historical cost +/-
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
CFA Level I 2015
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 =
d
/
15. No of shares subscribed when warrants are
8'''
exercised =
shares subscribed per lot
16. Carrying amount of the leased asset =
Initial recognition amount Accumulated
depreciation
17. Accumulated depreciation = Prior years
accumulated depreciation + Current years
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
 FinQuiz Formula Sheet CFA Level I 2015

20. Cost of sales = Carrying amount of the 3. Retained CF (RCF) / Total debt =
leased asset PV of the estimated (' #V , 0# 2'$ *$) 13. Adjusted Price to BV ratio =
, 1 v
unguaranteed residual value
8s$ d+
) #V/# 9 14. Tangible B.V = Total stockholders equity
21. Interest Revenue = Lease receivable at the 4.
! ,
Goodwill Other intangible assets
beg of the period Interest rate
5. Inventory value adjusted to FIFO basis = 15. Price to tangible BV ratio =
!', d+
22. Net interest expense = Beg Net pension End Inventory value under LIFO + End
liability Discount rate LIFO reserve balance 16. Adjusted debt-to-equity ratio =
) ,'+ ' $
) 7C
23. Net Interest income = Beg Net Pension 6. COGS adjusted to a FIFO basis = COGS
asset Discount rate under LIFO (End LIFO reserve Beg
LIFO reserve) 17. Adjusted debt-to-asset ratio =
) ,'+ ' $
24. Reported pension expense (U.S. GAAP) = ) 8$$' + ' $
Pension costs Expected return on 7. Useful life of the companys overall asset 18. Adjusted Asset Turnover ratio =
Pension plan assets 8 $
base that has passed =
$$ 7 ) 8*' $$$'+ ' $

25. Funded Status = PV of the Defined benefit

8. Avg age of the asset base = 19. PV of future operating lease payments* =
obligations Fair value of the plan assets 8
+ $ $
8 9$
"$ / # -$ $
Reading 33: Financial Reporting Quality Undiscounted Noncurrent Operating
9. Remaining useful life of the asset = Lease Payments
/ 7 ( )
8 9$ *If term structures of capital and operating
Reading 34: Financial Statement Analysis: leases are assumed to be similar
Applications
10. Avg depreciable life of the assets at
$$ 7 20. Interest expense = Interest PV of the
1. Companys sales = Projected market share installation =
8 9$ lease payments
Projected total industry sales
11. % of asset base that is being renewed 21. Depreciation expense estimated on
2. Forecast amount of profit for a given through new capital investment = straight-line basis =
period = Forecasted amount of sales #9
+ 2 $ $
$$ 7' #9
Forecast of the selected profit margin / $ $ $

12. Adjusted BV = Total stockholders equity 22. Adjusted Interest Coverage ratio =
Goodwill
 FinQuiz Formula Sheet CFA Level I 2015

EBIT + rent exp Dep exp 3. Optimal Capital Budget is the point where S(O
B, S(O = , bO.S 1 + 1 S(O
expense + costs MC of capital = Marginal return from S(O
investing
* Unadjusted [
13. H77IG = s
**associated with the operating lease 4. After-tax cost of debt = Before-tax &' &/G

obligations Marginal Cost of Debt (1 firms
marginal tax rate) 14. I~TMGa = H77IG 1 + 1
h

Reading 35: Capital Budgeting
5. Preferred Stock Price per Share
1 * 2 15. Sovereign yield spread = Govt bond yield
1. Incremental CF = CF with a decision - CF =
#$ 1 (denominated in developed countrys
without that decision
currency) T.B yield on a similar maturity
2. NPV = PV of cash inflows - IO =
6. Expected Return on Stock I (under CAPM) bond in developed country
n
AT CFs at time t = E (Ri) = RF + i [E (RM) RF]
NPV = t
IO
t=1 (1+ Req RoR ) 16. Country equity premium = Sovereign yield
7. Expected Return on Stock I = E (Ri) = RF +
8 . 7C 9
i1 (Factor risk premium)1 + i2 (Factor spread 8 . $*' , &1
3. Avg Accounting RoR (AAR) = risk premium)2+..+ij (Factor risk $ * 1
8*' / & GHI7 , $
8*' d+ *$
premium)j
17. Cost of equity = Ke= RF + [(E(RM)-RF) +
+ #V$ /+
4. PI = =1+ % CRP]
. .
8. Cost of Equity = = +g
g

5. Value of a company = Value of companys 18. Breakpoint =

existing invst + Net PV of all of 9. Expected Growth Rate of Dividends 8 <22 $e $ $
< $ 2 $
companys future invst g = (1 - ) ROE
7
g = retention rate ROE
19. Cost of Capital when flotation costs are in
Reading 36: Cost of Capital
%
monetary terms= r = +g
10. Companys stock returns = R = a + g /V
1. WACC = wdrd (1 t) + wprp + were bR
20. When FC are in terms of % of the share
2. Debt-to-Equity Ratio conversion into 11. Unlevered of Comparable Company = %
price: Cost of Equity = r = +g
weight (i.e. Debt / (Debt + Equity) = g &/
, ghjzi
piz{ ", = pghjzi
|}~k{ &' &/ghjzi
piz{ |ghjzi 21. If FC are not tax deductible: NPV = PV of
&'
|}~k{
Cash Inflows IO (FC in % New
12. Levered of Project = Equity Capital)
 FinQuiz Formula Sheet CFA Level I 2015

22. If FC are tax deductible: NPV = PV of 8. Breakeven Number of units =

Cash Inflows IO [(FC in % New V9 .' #$$'V9 V #$$ 9. EPS after buyback =
/+, $ 7'$/8 9 #$ V$
Equity Capital) (1 Marginal Tax Rate)]
2$ .$' d,1
Reading 38: Dividends & Share Repurchases:
23. Asset = (Debt Proportion of Debt) +
Basics 10. Ex-dividend value of share = Stock price
(Equity Proportion of Equity)
Dividend per share
1. Companys payout for the year = Cash
Reading 37: Measures of Leverage
dividends + Value of shares repurchased in 11. Market value of Equity after distribution of
any given year cash dividends =
1. Contribution Margin (CM) = (# of units
[(# $2$ /$) (&+ $2) #$2 *]
sold) [(price per unit) - (variable cost per # $2$ /$
2. Dividend Payout ratio =
unit)] # $2 $2 *$ 12. Post-repurchase share price =
2. Per unit CM = Price per unit - Variable / *, $2$ # $2$ /$ (&+ $2
cost per unit <2 2 2$]
( # $2$ /$/# $2$ 2$ ( , 2$ , #
3. EPS after Stock Dividend = EPS before
3. Operating income = CM Fixed Operating 2$ /$ , *
Dividend Reading 39: Working Capital Management
2$ /$ *
Costs

% .' 7d!
4. Stock Price after Stock Dividend = Stock 1. Operating cycle = No of days of inventory
4. DOL = Price before Dividend EPS after + No of days of receivables
% "$
or Dividend
#&
DOL= 2. Net operating cycle = No of days of
#&/ V9 .' #$
5. Total Market Value after Stock Dividend = inventory + No of days of receivables No
% /
Shares outstanding after Dividend Stock of days payables
5. DFL = or price after Dividend
% .'
#&/ V9 . #$ 3. Money Market Yield =
#&/V9 . #$$/V9 V #$ V */2$
6. Stock price after 2-for-1 stock split =
1 , $1 $ 2$
% / l pqd
6. DTL= = DOL DFL =
% / "$ / $
#&
#&/V9 . #$$/V9 V #$ 7. EPS after 2-for-1 stock split =
7 , $1 $ 4. Bond Equivalent Yield =
l V */2$
7. Break-even Revenue = (Variable cost per
2$
unit Break-even Number of Units) + 8. DPS after 2-for-1 stock split = pqv

Fixed Operating costs + Fixed Financial / $

, $1 $
Cost l
 FinQuiz Formula Sheet CFA Level I 2015

5. Discount-basis Yield = 12. Commercial Paper Cost {

3. Dividend Yield =
{%
V */2$ $'e $ $$'d1 $$
=
V + - /$
pqd 4. 3-Yr HPR = [(1 + R1) (1 + R2) (1 +
/ $
13. Annualized cost = Cost 12 R3)] 1

6. Wght Avg collection period = wghts

Reading 40: The Corporate Governance of 5. Arithmetic mean (AM) R = M =
Avg no of days to collect accounts within N% 'N ''N.% 'N &
Listed Companies = *
G\& MG
each age category * *

Where, Weights = % of total receivables in 6. Geometric R for n periods = R DM =

Reading 41: Portfolio Management: An 1 + & 1 + l 1 + L
&
* 1
each category
Overview
8*' V ! #V !
7. Float Factor = = 7. IRR = \d &')) { =0
8*' $ 1. NAV of bond mutual fund =
8*' V (* 2 , 2 )
g{ g~{ gR il pihglk{iS
fg gR pl
/ $2$ 8. Annualized Return (Ann R):
Ann R = (1 + Quarterly R) 4 1
2. New Shares that need to be created =
Where, Float =Amount of money that is in Ann R = (1 + Monthly R) 12 1
8 , *$ 2 V
transit b/w payments (by customers) and /8+ $2 ! * $2 & V
Ann R = (1 + Weekly R) 52 1
funds (usable by co)
Ann R = (1 + Daily R) 365 1
3. New NAV of the Fund = NAV or Total
8. Value of stretching payment = A/c payable value of a Mutual Fund + Amount to be Weekly R = (1 + Daily R) 5 1
Co's opportunity cost for ST funds invested in the Fund Weekly R = (1 + Annual R) 1/52 1

9. Cost of Trade Credit = 1 + 4. No of shares need to be retired = 9. Portf R (for Two Assets) = (Wght of Asset
mno
8 , <2< 2 V 1 R of Asset 1) + (Wght of Asset 2 R
$ /8+ $2 ! * $2 & V
1 of Asset 2)
&/$
where n = days beyond discount period Reading 42: Portfolio Risk & Return: Part I
10. Gross R = R Trading exp other exp
10. Cost of Line of Credit = directly related to the generation of returns.
1. Total Return = Capital Gain (or Loss) +
$'#
Dividend Yield
- 8 11. Net R = Gross R - All managerial and
$
11. Bankers Acceptance Cost = = administrative exp
/ $ { /{%
$ 2. Capital Gain =
{%
- /$
 FinQuiz Formula Sheet CFA Level I 2015

12. After-tax nominal R = Total R - Any

allowance for taxes on realized gains 24. Expected R of Portfolio = E R = w& R + 4. Single-Index Model (based on realized
1 w& E R returns): Ri Rf = i(Rm Rf) + ei
13. (1 + Nominal R) = (1 + Real Rf R) (1 + 5. Factor weight associated with each factor =
Inf) (1 + RP) 25. Risk of Portfolio = l = w&l l + ! )$1
! &1 )$1
(1 w& )l l + 2w& 1 w& &l =
14. (1 + Real R) = (1 + Real Rf R) (1 + RP) 1 w& l l &p = (1 w1) i,
6. S = Q + S . Q =
Where = S. D. of risk free asset
(&'/ )) = R + w& & + wl l E R R
15. (1 + Real R) = 26. Capital Allocation Line (CAL) = E R =
(&') 7 )k /)R

N[ / R +
16. Var of a Single Asset = = l % k 7. Assets Beta =
*
# ,< $$ 1 .. 8$$
.. &1

){ /)
17. Sample Variance = s = l {% 8. Portfolio Beta = =
!/& 27. In portfolio of many risky assets =

\& w ; \& w = 1
/
18. Cov of R b/w two assets = Cov (Ri,Rj) = E R = \& E R
(//&) )h /)R
ij i j l = + Cov 9. Sharpe Ratio =
/ / h

19. Portfolio Var = l = w&l &l + wll ll + =

+
(//&)
l N /N
2w& wl Cov R& , R l = w&l &l + wll ll + / / 10. Treynor Ratio =

2w& wl &l & l l c
28. New Asset should be included in the Portf 11. M = R $ RQ . Q

7 )i /)R 7 )h /)R
20. Portfolio S.D. = Portfolio Variance only if i
>
h
<,
12. Jansens Alpha = S = S
Q + S . Q
Reading 43: Portfolio Risk & Return: Part II
21. Correlation of Return b/w two assets =
#* ) ,/< < $$$ 13. Security Characteristic Line (SCL) = R
1. Total Risk = Systematic risk + R = + R R
.. $$ & .. $$ l
Nonsystematic risk = 2i 2m + 2e
22. 1 + Expected Return =1 + E R = 14. Weight in Nonmarket security should be
1 + r 1 + E 1 + E RP 2. Total risk of for a well-diversified portfolio proportional to
= Systematic risk = im 82
= i / 2ei
/$$ *
23. Utility of an Invest = Expected Return -
& 3. Multi-Factor Model: M Q =
Risk Aversion Coefficient
l |
\& M ( ) = M . Q +
Var of Invest |
\l M ( )
 FinQuiz Formula Sheet CFA Level I 2015

15. Total Weight of Nonmarket securities in Remaining Equity = IO Purchase 7. Max leverage ratio for position financed by
portfolio should be proportional to = commission + (-) Trading g(l) Margin i min margin requirement =
#
paid + Div received Sales commission &
%
# & ' C
% paid
OR
16. Information Ratio = Remaining Equity = Proceeds on sale
82
Payoff loan Margin i paid + Div received
/$$ )$1 Reading 46: Security Market Indices
Sales commission paid
17. Expected Return of Portfolio (under 1. Value of a price return index =
2. ROE (based on leverage alone)
Arbitrage Pricing Model) = E R = R V + N
= Leverage (in times) stock price return
, + + 1 ,1
(in %) n P
i =1
i i
VPRI =
18. Return on an Asset in excess of 1-Month 3. Price of stock below which a margin call D
T-Bill Return (under four factor model) = will take place (P):
E R = + ,&! MKT + Initial margin $ + (P Initial Stock Price) For Single Period:
,&d SMB + ,t&- HML + ,"& UMD P 2. % Change in value of Price return index
= Maintenance Margin Requirement (%) VPRI 1 VPRI 0
Reading 44: Basics of Portfolio Planning &
Construction 4. Total cost of placement to the issuing firm Portfolio = PR I =
VPRI 0
in IPO ($)
1. Investors Expected Utility from Portfolio = Gross proceeds received by the issuing
= Up = E (Rp) 2p firm Net proceeds received by the issuing 3. Price Return (Ind constituent security):PR I
firm Pi1 Pi 0
2. Tactical Asset Allocation (TAA) Return =
contribution = Actual return of the 5. Total cost of placement to the issuing firm Pi 0
portfolio Return that would have been ($$ $ * , V/
/ $ * , V
earned if the asset class weights were equal in IPO (%) = 4. Price return of the index: PR I =
/ $ * , V
to the policy weights where IF = Issuing firm N
Pi1 Pi 0
w i
P

Reading 45: Market Organization & Structure &dd% i =1 i0
6. Max leverage ratio =
% 7C

1. Total return to a Leveraged Stock Purchase

)' 7C/.
= where,
.
 FinQuiz Formula Sheet CFA Level I 2015

5. Total return of Index Portfolio: 12. Weight of Si under Float-Adjusted Mkt

VPRI 1 VPRI 0 + IncI Cap weighting = 6. ROE = Net profit margin Asset turnover
V $2$ /$ 1 $2$ / '$
VPRI 0 2 $ Financial leverage =
/ $$
(V $2$ /$ &1 $2$ /$ / $$ 8*' $$$
2 $ )
8*' $$$ 8*' C
6. Total return of each security = TRi =
13. Fundamental weight on security i =
P1i P0i + Inci V $v $
Reading 49: Introduction to Industry &
Company Analysis
P0i f (V $v $ )
%

N
P P0i + Inci *Book value, cash flow, revenues, earnings,
Total Re turn = wi 1i
i =1 P0i dividends, & number of employees. Reading 50: Equity Valuation: Concepts &
Basic Tools
Over Multiple Time Periods: Reading 47:Market Efficiency
1. Value of a share of stock today =
7. Value of Price Return index at time t =
79 *
VPRIT = VPRI0 (1 + PRI1) (1 + PRI2) (1 + \& (&'C ).) $1){
PRIT) Reading 48: Overview of equity Securities If an investor intends to buy and hold a share
for 1 yr:
8. Value of Total Return index at time t = 1. Equity securitys Total Return =
VTRIT = V TRI0 (1 + TRI1) (1 + TRI2) (1 + $2/2$ $2'$2/$1 *
2. Value of a share of stock today =
2$ $2
TRIT) 79 * & '79 $' &
(&'C )) $1)%
2. ROE in yr t =
9. Weight of security i under price weighting / ( . 22$)
$ 3. Value of a share of stock for n holding
= 8*' ! d+ 7C
$ $ $$
OR periods or investment horizon =
L 79 *
/ ( . 22$) G\& &'C ) $1 { +
10. Weight of security i under equal weighting ROE =
22$e C ,'
79 $
=
&
/ $$ 2 9 &'C ) $1
3. MV of equity = Mkt price per share
11. Weight of security i under market-cap Shares O/s 4. CFO = NI + Non-cash exp Inv in WC
weighting =
! te $ C
/d $2$ /$ 2 4. BV of equity per share = 5. FCFE = CFO FCInv + Net Borrowing
f / $2$ /$ 2 2$ /$
%

Where Si = Security i 6. Value of a share for a non-div-paying

&1 $2
5. Price-to-book ratio = V#V7
d+ C $2 stock = \& &'C ) $1 {
 FinQuiz Formula Sheet CFA Level I 2015

7. ReqRoR on sharei = Current expected Rf 2. Present value of deficiency =

rate + Beta i [MRP] 14. EV = MV of stock + MV of debt Cash # /&1 $ *
\& &'&1 $ {
and cash Equivalents
8. Value of a pref stock (non-callable, non-
3. Bond price =
convertible) = 15. Asset-based value = Value of Assets
D0 (1 + g ) D0 (1 + 0) D0 Value of Liabilities PMT PMT PMT + FV
V0 = = = PV = 1
+ 2
+... +
rg r 0 r (1+ r) (1+ r) (1+ r) N
Reading 51: Fixed Income Securities: Defining
Elements 4. % Price change =
/< /.
9. Value of a pref stock (non-callable, non- .
convertible) with maturity at time n =
L 1. Inf adj Principal amount of a zero-coupon-
d 5. Bond price (given sequence of spot rates)
d = + indexed bond
(1 + ) G 1+ L
= [Par value (1 + CPI)] = PV =
G\&
2. Inf adj coupon payment for an interest- PMT PMT PMT + FV
1
+ 2
+... +
Gordon Growth Model: indexed bond (1+ Z1 ) (1+ Z 2 ) (1+ Z N ) N
10. Value of a share of stock = = [(coupon rate Par value) (1+CPI)]
D (1 + g ) D1 6. Full price of bond = Flat price of bond +
V0 = 0 = , g<r
rg rg 3. Inf adj Principal amount of a capital- Accrued interest
indexed bond
11. Sustainable dividend growth rate = = [Par value (1 + CPI)] G
7. Accrued interest = AI =
*
g = ROE b
where b = earnings retention rate = (1 - 4. Inflation adjusted coupon payment for a
8. Full price of a fixed-rate bond between
Dividend payout ratio) capital-indexed bond
coupon payments = PVFull
= [Par value (1 + CPI)] coupon rate
PMT PMT PMT + FV
= 1t/T
+ 2t/T
+... +
Two-stage valuation model: Reading 52: Fixed Income Markets: Issuance, (1+ r) (1+ r) (1+ r) Nt/T
12. Value of share today = V0 = Trading & Funding
L 9. Full price of a fixed-rate bond between
G
d 1 + 7 L
d = + coupon payments
(1 + )G (1 + )L
G\&
L'&
Reading 53: Introduction to Fixed Income PV (1+ r)t/T
L = Valuation
B
L'& = d (1 + 7 )L 1 + B 10. Interpolated yield (say for 3-year, given
1. Amount of discount below par value = market discount rates for 2 and 5 yrs) =
Present value of deficiency p/l
d % /7% (Average yield for 2 year bonds) +
13. Justified P/E = = = v/l
7& /' /'
 FinQuiz Formula Sheet CFA Level I 2015

(average yield for 5 year bonds average ! Yr $ ! FV PV $

yield for 2 year bonds) AOR = # &# & 3. Pass-through rate = Mortgage rate on the
" Days % " PV % underlying pool of mortgages Servicing
! APRm $ ! APRn $
m n Fee - Other fees
11. #1+ & = #1+ & Relation b/w two spot rates and Implied
" m % " n % Forward Rate: 4. SMM = Pre-pmt for month (Beg
mortgage balance for month Scheduled
12. Current yield = 18. (1 + zA)A (1 + IFRA,B-A)B-A = (1 + zB)B principal re-pmt for month)
$ * * 2
V
Z-spread over the benchmark spot curve: 5. CPR = 1 (1 SMM)12
Price of a bond =
13. Price of Floating-rate note = PV=
PMT PMT PMT + FV 6. CF Construction (Monthly CF for MPS):
PV = + +... +
(1+ z1 + Z)1 (1+ z2 + Z)2 (1+ zN + Z) N Net interest = (Beg mortgage
(I + Qm) FV (I + QM ) FV (I + QM ) FV
+ FV
m + m +... + m balance Pass-through rate) / 12
" I + DM %
1
" I + DM %
2
" I + DM %
N
19. OAS = Z-spread Option value (bps per Scheduled principal re-pmt =
$1+ ' $1+ ' $1+ '
# m & # m & # m & year) Mortgage pmt Gross i- pmt
Gross i- pmt = (Beg mortgage
14. Price of Money Market Instrument (on a 20. G-spread = Yield-to-maturity on Corporate balance WAC) / 12
discount-rate basis) = bond Yield-to-maturity on a government Pre-pmt for month = SMM
# Days & bond (Beg mortgage balance for month
PV = FV %1 DR (
$ Year ' Scheduled principal re-pmt for
21. Interpolated Spread = I-spread = Yield to month)
maturity of the bond - Standard swap rate Total principal re-pmt =
15. Market Discount Rate =
in that currency of the same tenor Scheduled principal re-pmt +
# FV PV &
DR = Year ( ) %
Days $ FV (' Reading 54: Introduction to Asset Backed
Prepayment
Beg mortgage balance for the
Securities
following month = Beg mortgage
16. Price of Money Market Instrument (on an balance for the month Total
add-on rate basis)= 1. Loan-to-value ratio (LTV) =
Principal Pmt
e $ 2$
FV 8 &'' Projected CF for MPS = Net i-
PV =
" Days % pmt + Total principal re-pmt
$1+ AOR '
2. Monthly CF for a MPS = Monthly CF of
# Yr & $ /.
underlying pool of mortgages - Servicing 7. DSC ratio =
, $*
17. Add-on rate = fee - Other fees
 FinQuiz Formula Sheet CFA Level I 2015

Reading 55: Understanding Fixed Income Risk 6. Capital g / (l) = Sale price of Bond after n
& Return years Carrying value of Bond after n 15. Macaulay D for a Perpetual bond = (1+ r) /
years r
1. Interest-on-interest gain from 16. Avg Mod D for the Portf =
compounding = Future value of reinvested 7. Macaulay Duration = &+ d &
Mod D of Bond 1
! &+
coupons - Total amount of coupon (
*
" PMT
$ 1t/T
%
'
" PMT
$ 2t/T
%
'
" PMT + FV %,
$ Nt/T '*
&+ d l
payments
*
MacDur = )(1 t / T )$
(1+ r ) ' + ( 2 t / T )$ (1+ r ) ' +... + ( N t / T )$ (1+ r ) '*- + Mod D of Bond 2 +
* $ PV Full
$
'
'
$ PV Full
$
'
'
$ PV Full '*
$ '*
! &+
+* &+ d /
Where, # & # & # &.
+ Mod D of Bond N
FV of Reinvested Coupons = [CR(1+ OR ! &+

RR)n-1] + [CR(1+RR) n-2] ++ [CR(1+

' + 17. Money D = Annualized Mod D Full
RR)n-n] )1+ r 1+ r + #$ N ( c r )%& ) Bond Price
Total Amount of Coupon Pmt = CR Par MacDur = ( , (t / T )
c #$(1+ r ) 1%& + r )
N
value No of periods )* r -
18. Full price of Bond (in currency units) -
Money D in annual YTM
RR = Re-invstmnt rate per period &
8. Modified D =
CR = coupon rate &'
(PV ) (PV+ )
9. Annualized Modified D = 19. PVBP =
2. Realized RoR on Bond=
&
2
%
)*$ #$' n
) & 20. Basis Point Value (BPV) = Money
1
d
10. % PV Full
= - AnnModDur Yield duration 0.0001 (1 bp)

3. Carrying value of bond (if bond purchased 11. Approx Modified D = 21. Bloombergs Risk Statistic = PVBP 100
below par) = Purchase price + Amortized
(PV ) (PV+ )
amount of Discount 22. %PV Full = (-AnnModDur Yield) +
2 (Yield) (PV0 ) &
()l
l
4. Carrying value of a bond (if bond
purchased above par) = Purchase price 12. Approx Mac Dur = Approx Mod Dur (1
Amortized amount of Premium + r)
23. Approx. Convexity Adjustment =

5. Amortized amount for 1st year = Bond (PV ) + (PV+ ) [2 (PV0 )]

(PV ) (PV+ )
Price after 1-yr - Initial bond price 13. Effective D = (Yield)2 (PV0 )
2 (Curve) (PV0 )

1/G
14. Macaulay D for a Zero-coupon bond =
*
 FinQuiz Formula Sheet CFA Level I 2015

24. Convexity of a zero coupon bond = ! ,

17. Total Leverage =
7d!8
[ N (t / T )] [ N +1 (t / T )] 6. EBITDA = Operating Income + Dep +
Amort ! ,/#$2
(1+ r)2 18. Net Leverage =
7d!8
7. FCF = CFO Cap exp Div
25. Money Convexity vs Money Duration = Reading 57: Derivatives Markets and
&
PV Full - (MoneyDur Yield) + [ 8. Capital expenditures = Additions to P&E + Instruments
l
MoneyCon (Yield) ] 2 Additions to product rights & intangibles
Proceeds of sale of P&E 1. Value of the contract to the Long at
26. Money Convexity of bond = Annual expiration = ST F0(T)
Convexity Full Price 9. Total debt = ST debt + Current portion of
LT debt + LT debt 2. Value of the contract to the Short at
27. Effective Convexity = expiration = F0(T) ST
10. Capital = Debt + Equity
#$( PV ) + ( PV+ ) [ 2 (PV0 )]%&
3. Margin % in stock market =
2 &+ 1/&+ ,
(Curve) ( PV0 )) 11. Yield on Corp Bond = Real Rf rate +
&+ 1
Expected Inf rate + Maturity P + Liquidity
P+ Credit spread 4. Margin Call:
28. Duration Gap = Bonds Macaulay
Duration Investment Horizon Long position: Price that would
12. Yield spread = Liquidity P + Credit spread
trigger a margin call = IM req MM
Reading 56: Fundamentals of Credit Analysis req
13. Return impact for smaller spread %
Short position: Price that would
in price -Modified Duration Spread
1. Expected Loss = Default Probability trigger a margin call = IM req MM
Loss Severity given Default req
14. Return impact for larger spread % in
2. Funds From Operations = NI +Dep +
price - (Modified D Spread) +
Amor+ Deferred income taxes noncash &
5. TED spread = LIBOR T-Bill rate
items Convexity (Spread)2
l
Where NI = Net Income 6. At expiration (for option Buyer):
! $ ,
3. FCF Before Div = NI Cap exp. (+) Inc 15. Secured debt leverage = Value of Call option =
7d!8
(dec) in Non-cash WC Non-recurring cT = Max (0, ST - X)
items 16. Senior unsecured leverage = Profit from Call option =
4. FCF After Div = FCF Before Div Div ,' $ , Max (0, ST - X) c0
7d!8 Value of Put option = pT =
.'
5. Operating Profit Margin = Max (0, X- ST)
)*
 FinQuiz Formula Sheet CFA Level I 2015

Profit from Put option = At Expiration F0 ( T) = S0 (1 + r) T or 7. Payoff of Call options:

Max (0, X- ST) p0 S0 = F0 (T) / (1 + r) T
Value of forward (long) during At expiration call option = c T = Max
7. At expiration (for option Seller): contract life (where t < T) = Vt (T) = (0, ST X)
Profit from Call option = St F0 (T) / (1 + r)(T t) Profit (call buyer) = Max (0, ST X)
Max (0, ST - X) + c0 Value of forward (short) during c0
Profit from Put option = contract life (where t < T ) = Vt Profit (call seller) = -Max (0, ST X)
Max (0, X- ST) + p0 (T) = F0 (T) / (1 + r) (T t) - St + c0
Value of forward (long) at expiration
8. To eliminate arbitrage opportunity: (where t = T) = VT (T) = ST - F0 (T) 8. Payoff of Put options:
Forward Price should be = Spot Price Value of forward (long) at initiation
1 + % G (where t = 0) = Vt (0, T) = S0 F0 (T) / p T = Max (0, X- ST)
(1 + r) T = 0 Profit (put buyer) = Max (0, X-ST) p0
Forward price of an asset with benefits Profit (put seller) = - Max (0, X ST) +
Reading 58: Basics of Derivative Pricing & and/or costs = (S0 + ) (1 + r) T = p0
Valuation S0 (1 + r) T ( - ) (1+ r) T
Value of Forward contract with 9. Max Profit/Loss for Option writer/holder:
7 (!)
1. Pricing of risky assets = S0 = benefits and/or costs during the life of
&''
2. Commodity = F 0, T = S0 e (r )T
where, = the contract = St ( - ) (1 + r) t - F0 Max profit of option seller/writer
Convenience yield Cost of carry (T) / (1 + r) (T t) Option premium.
Max loss of option seller/writer
7 ( ) 6. FRAs: An example of 3 9 FRA (read as unlimited in case of calls; large in case
3. S0 = +
&'' three by nine): of puts (bounded by zero).
where, (theta) = Present value of the Contract expires in 90 days Max loss of option holder Option
costs and (gamma) = Present value of Underlying loan settled in 270 days premium
benefits Underlying rate is 180-day LIBOR
For Synthetic FRA (take long position Put-Call Parity
4. Arbitrage and Derivatives = Underlying in a 270-day Euro$ T.D and short
asset + Opposite position in derivative = position in a 90-day Euro$ T.D 10. Protective Put
Underlying payoff Derivative payoff = Value PP = p0 + S0
For synthetic forward position in a 90-
Rf return Payoff at expiration (put out-of-the-
day zero-coupon that begins in 30
days (buy 120-day & sell 30-day zero money) = ST.
5. Pricing and Valuation of Forward
coupon bonds) Payoff at expiration (put in-the-
Contracts:
money) = (X-ST) + ST = X.
 FinQuiz Formula Sheet CFA Level I 2015

S1
+
S
Breakeven = ST* = X + c0
11. Fiduciary Call u= ,d = 1
S0 S0 2. For Call Option Seller
Value FC = c0 + X / (1+r) T Value at time 0 = V0 = hS0 c0
Payoff at expiration (when call out-of- Value at time 1 will either V1+ = hS1+ - cT = max (0, ST X)
the-money) = X. c1+ or V1- = hS1- - c1- When ST X cT = 0
Payoff at expiration (call in-the- If the portfolio was hedged, then V+ When ST> X cT = ST X
money) = X + (ST X) = ST. would equal V-. Value at expiration = -cT
Profit = cT+ c0
12. Put-Call Parity (to avoid arbitrage) = c0 + Value of the call = Maximum profit = c0
X / (1+r) T = p0 + S0 Maximum loss = no upper limit
Breakeven = ST* = X +c0
Synthetic long position in a call =
X 3. For Put Option Buyer
c0 = p 0 + S 0
(1 + r )T
pT = max (0, X - ST)
Synthetic long position in a put =
When ST< X pT = X - ST
X
p 0 = c 0 S 0 + When ST X pT = 0
(1+ r)T Value at expiration = pT
Synthetic long position in an Profit = pT p0
Value of the put =
X Maximum profit = X p0
underlying = S0 = c 0 + p0
(1+ r)T Maximum loss = p0
Breakeven = ST* = X p0
Synthetic long position in a riskless
Reading 59: Risk Management Applications of
X 4. For Put Option Seller
bond = = p 0 +S0 c0 Option Strategies
(1+ r)T
1. For Call Option Buyer pT = max (0, X ST)
T
13. Put-Call-Forward Parity = F0(T) / (1 + r) cT = max (0, ST X) When ST< X pT = X ST
+ p0 = c0 + X/(1 + r) T When ST X cT = 0 When ST X pT = 0
When ST> X cT = ST X Value at expiration = pT
14. Valuing a callable bond using Binomial Value at expiration = cT Profit = pT + p0
Model: Profit = cT c0 Maximum profit = p0
Maximum profit = no upper limit Maximum loss = X - p0
Maximum loss = c0
Breakeven = ST* = X - p0
 FinQuiz
5. Covered Call = Long stock position +
NHGI
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 - S T)
When ST X VT = ST + X - ST = X
When ST> X VT = ST
Profit = VT S0 - p0
Maximum Profit =
Maximum Loss = S0 + p0 X
Breakeven =ST* = S0 + p0
Reading 60: Introduction to Alternative
Investments
1. Total Return = Alpha R + Beta R
2. Asset Based Valuation = Co value = Cos
assets value Cos liabilities value
Real Estate Valuation
Formula Sheet CFA Level I 2015
3. Direct Cap Approach Valuation of a
1Vf 11. Sortino Ratio = (Annualized RoR
property = where
RHSMGHxMHGMOL
Annualized Rfe rate)/Downside Deviation
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 REITs NAV =
Estimated MV of REITs total assets
Value of REITs 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