FinQuiz Formula Sheet CFA Level I 2016

Reading 5: Time Value of Money * Q!

EAR (with Continuous Compounding) 4. MMWR = M[f &'gNN Z = 0 (IRR
= EAR = (- 1
represents the MWR)
1. Interest Rate (i)
i = Rf + Inf P + Default Risk 5. PV & FV of Ordinary Annuity
%
5. TWR:
P + Liquidity P + Maturity P $)*
&/
%^_ #
PVOA = L
G[& &'( Z = TWR (when no external CF) = rTWR =
Nominal Rf i rate = Real Rf i Rate + ( )"% /)"h
Inf P 1/G
HPR = rt =
L )"h
% FVOA = G[& G 1 + =
!"# # TWR (for more than one periods) =
i rate as a growth rate = g = -1 &'( # /&
$" rTWR = [(1+rt,1) (1+rt,2) (1+rt,n)] -1
(
Size of Annuity Payment = PMT = Annualized TWR (when investment is
2. PV and FV of CF = $" for more than one year)
!" $" OP KLLSMG` !HaGO(
PV = = 1 + & 1 + k +
&'( # &/
%
_- b# %
$)* %^
PV of Perpetuity = PV of Annuity Factor = b 1 + L m
_1
( _-
b
PV (for more than one Compounding TWR (for the year) = rTWR = [(1+R1)
(- /.1 (1+R2) (1+R365)] -1 where R1 =
per year) = PV= FVN 1 + 6. PV & FV of Annuity Due )"% /)"h
.
%
7 = &/
%^_ #
)"h
PVAD = + PMT at t =
FVN = 1 + 1 (

FV (for more than one Compounding PVOA + PMT 6. Bank Discount Yield = BDY = rBD =
opf $H(/$(MaI
(- .1 &'( # /& therefore Price = Par
per year) = FVN = 1 + FVAD = (1 + ) = L $H(
. (
L (qr
FV (for Continuous Compounding) = FVOA (1+r) 1
opf
FVN = (-1
B1
CD Reading 6: Discounted Cash Flow Applications 7. Holding Period Yield = HPY =
$% /$h ' i%
ED
Solving for N = (where LN = $h
B1 &'(
L Q!Z
natural log) 1. NPV = G[& &'( Z f
8. Effective Annual Yield = EAY = 1 +
4. Stated & Effective Rates opu/G 1 (Rule: EAY > BDY)
2. IRR (when projects CFs are perpetuity) =
Periodic i Rate = Q!
FGHGIJ KLL M NHGI NPV = - IO + =0 9. Money Market Yield (or CD equivalent
gNN
1O OP QO.ROSLJMLT $I(MOJ7 ML ULI VIH( Yield) rMM:
Effective (or Equivalent) Ann Rate $% /$h ' i% opf
3. HPR = rMM = HPY
G
(EAR = EFF%) = 1 + $h
rMM = (rBD)
. 1 !HaI "HwSI OP GxI *(IH7S(` yMww
$S(axH7I $(MaI
 FinQuiz Formula Sheet CFA Level I 2016

opf (qr #
rMM = (Rule: rMM> For Even no of obvs locate 17. Population Var = 2 = % /
opf/ G (qr L 1
median at
rBD) k # /
%
10. Bond Equivalent Yield = BDY = For Odd no. of obvs locate 18. Population S.D = k =
1
L'&
Semiannual Yield 2 median at
k m
% /
19. Sample Var = s2 =
Reading 7: Statistical Concepts & Market L/&
9. Mode = obvs that occurs most frequently
Returns in the distribution m /
%
20. Sample S.D = s =
L/&
1. Range = Max Value Min Value 10. Weighted Mean = = L
M[& M M =
(w1X1+ w2X2+.+ wnXn) /
2. Class Interval = i
z/B
where 21. Semi-var = !O( Hww L/&
{
m
i = class interval 11. Geometric Mean = GM = & k L
22. Semi-deviation (Semi S.D) =
H = highest value with Xi0 for i = 1,2,n.
/
L = lowest value, k = No. of classes. = !O( Hww
L L/&
12. Harmonic Mean = H.M = z = m %
3. Absolute Frequency = Actual No of %

/y
Observations (obvs) in a given class 23. Target Semi-var = !O( Hww y L/&
m
interval where B = Target Value
13. Population Mean = = with M > 0
1

K|7OwSGI !(I}SILa`
for i = 1,2,.,.,n.
4. Relative Frequency = 24. Target Semi-Deviation =
*OGHw 1O OP U|~7
m

=
14. Sample Mean = = where n =
L
5. Cumulative Absolute Frequency = Add up /y
number of observation in the sample !O( Hww y L/&
the Absolute Frequencies

15. Measures of Location: F

6. Cumulative Relative Frequency = Add up iM7G(M|SGMOL 25. Coefficient of Variation = CV =

the Relative Frequencies Quartiles =
where s= sample S.D and = sample
iM7G(M|SGMOL
Quintiles = mean
FS. OP O|~7 ML JHGH|H7I u
7. Arithmetic Mean = iM7G(M|SGMOL
1O.OP O|~7 ML GxI JHGH|H7I Deciles = ,
&f )IHL $O(GPOwMO N /)IHL NP N
` 26. Sharpe Ratio =
Percentiles = Ly = + 1 F.i OP $O(GPOwMO N
8. Median = Middle No (when observations &ff

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

16. Mean Absolute Deviation = MAD =
order) m
% Z /
L
 FinQuiz Formula Sheet CFA Level I 2016

28. Geometric Mean R Multiplication Rule for two 13. Standard Deviation (S.D) =
"H(MHLaI OP N
independent events = P(A & B) = &k M + kk k + ok o
k
P(AB) = P(A) P(B)
Reading 8: Probability Concepts Multiplication Rule for three 14. Correlation (b/w two random variables Ri,
independent events = P(A and B QO~ N N
Rj) = M =
1. Empirical Prob of an event E = P(E) = and C) = P(ABC) = P(A) P(B) N N

$(O| OP I~ILG P(C)

*OGHw $(O| 15. Bayes Formula =
8. Complement Rule (for an event S) = P(S) | =
$(O| OP
2. Odds for event E =
&/$(O| OP
+ P(SC) = 1 (where SC is the event not S)
$ 1I gLPO(.HGMOL|~ILG

$ 1I gLPO(.HGMOL
.
&/$(O| OP 9. Total Probability Rule:
3. Odds against event E =
$(O| OP P(A) = P(AS) + P(ASC) = P(A|S)P(S) +
16. Multiplication Rule of Counting = n
P(A|SC)P(SC)
4. Conditional Prob of A given that B has factorial = ! = n (n-1)(n-2)(n-3)1.
P(A) = P(AS1) + P(AS2) +.+ P(ASn) =
$ Ky
occurred = P(A|B) = P(B) 0. P(A|S1)P(S1) + P(A|S2)P(S2)
$ y 17. Multinomial Formula (General formula for
P(A|Sn)P(Sn) L!
labeling problem) =
5. Multiplication Rule (Joint probability that L% !L !L !

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

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

6. Addition Rule (Prob that event A or B will 11. Cov (Ri Rj) = M[& M M
of objects selected.
occur):
Cov (Ri Rj) = Cov (Rj Ri) L!
19. Permutation = L ( =
P(A or B) = P(A) + P(B) P(AB) Cov (R, R) = 2 (R) L/( !

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

mutually exclusive because P(AB) = 0) 12. Portfolio Var = 2 (Rp) = Reading 9: Common Probability Distributions
L L
M[& [& M M
7. Independent Events: 1. Probability Function (for a binomial
2 (Rp) = &k k & + kk k k + random variable) p(x) = p(X=x) =
Two events are independent if: ok k o + 2& k & , k + L L/ L!
P(B|A) = P(B) or if P(A|B) =
1 ==
2& o & , o + L/ !!R &/R m
P(A) (for x = 0,1,2.n)
2k o k , o
 FinQuiz Formula Sheet CFA Level I 2016

x = success out of n trials

n-x = failures out of n trials 6. Roys Safety-Frist Criterion = SF Ratio = 14. Continuously compounded return
NE /N associated with a holding period from 0 to
p = probability of success
E
1-p = probability of failure T:
n = no of trials. NE /N
7. Sharpe Ratio = = R0,T= ln (ST / S0) or f,* = */&,* +
E
2. Probability Density Function (pdf) = f(x) */k,*/& + + f,&
&
8. Value at Risk = VAR = Minimum $ loss
= |/H = Where,
0 expected over a specified period at a
/H specified prob level. rT-I, T = One-period continuously
F(x) = < <
|/H compounded returns
9. Mean (L) of a lognormal random variable
3. Normal Density Funct = = 15. When one-period continuously
& /(/)
= exp ( + 0.502)
for < < + compounded returns (i.e. r0,1) are IID
k k
10. Variance (L2) of a lognormal random random variables.
4. Estimations by using Normal Distribution: variable = exp (2+ 2) [exp (2) 1].
f,* = */&,* + */k,*/& +
Approximately 50% of all obsv fall in 11. Log Normal Price = ST = S0exp (r0,T) + f,& = And
the interval
k Where, exp = e and r0,t = Continuously
o
compounded return from 0 to T = k f,* = k
Approx 68% of all obvs fall in the
interval 12. Price relative = End price / Beg price =
Approx 95% of all obvs fall in the S.D. = (r0,T) =
St+1/ St=1 + Rt, t+1
interval 2
Approx 99% of all obvs fall in the 16. Annualized volatility = sample S.D. of
where,
interval 3 one period continuously compounded
Rt, t+1 = holding period return on the stock
More precise intervals for 95% of the returns
from t to t + 1.
obvs are 1.96 and for 99% of the
observations are 2.58. Reading 10: Sampling and Estimation
13. Continuously compounded return
associated with a holding period from t to t
5. Z-Score (how many S.Ds away from the 1. Var of the distribution of the sample mean
+ 1:

mean the point x lies) = =
L
= rt, t+1= ln(1 + holding period return) or 2. S.D of the distribution of the sample mean
/
(when X is normally distributed) rt, t+1 = ln(price relative) = ln (St+1 / St) = ln
=
(1 + Rt,t+1) L
 FinQuiz Formula Sheet CFA Level I 2016

x sampled is normally or approximately

3. Standard Error of the sample mean: 8. Z-ratio = Z= normally distributed)
When the population S.D () is known / n

= = x 6. Test Statistic for a test of diff b/w two pop
L 9. t-ratio = t= means (normally distributed, pop var
When the population S.D () is not s/ n
7 unknown but assumed equal)
known = = where s = sample
L
S.D estimate of s = Reading 11: Hypothesis Testing % / / % /
t= %/ where Rk = pooled


= '
m 1. Test Statistic = m% m
% /
k k = estimator of common variance =
L/&
L% /& F% ' L /& F
where = & + k
L% ' L /k
4. Finite Population Correction Factor = fpc *
when Pop S.D is unknown, the standard 2.
1/L
= where N= population error of sample statistic is give by =
1/&
F
7. Test Statistic for a test of diff b/wn two
L
pop means (normally distributed, unequal
5. New Adjusted Estimate of Standard Error
* and unknown pop var unknown)
= (Old estimated standard error fpc) when Pop S.D is unknown, the standard
error of sample statistic is give by =
% / / % /
6. Construction of Confidence Interval (CI) = t= %/
In this df calculated as
L
% '
Point estimate (Reliability factor m% m

Standard error)
2. Power of Test = 1-Prob of Type II Error % '
m% m
=

CI for normally distributed population /h
%
m% m

3. = (when sample size is large or '
with known variance = H/k m
m% m
L
CI for normally distributed population small but pop S.D is known)
F
8. Test Statistic for a test of mean differences
with unknown variance = H/k (normally distributed populations,
L /h
4. = - (when sample size is large but
where S = sample S.D. m
unknown population variances)
pop S.D is unknown where s is sample
7. Students t distribution S.D) =
J/h
F FJ
= H/k
L sample mean difference = =
/h
5. L/& = (when sample size is large or
& L
M[& M
-
m L
m
small and pop S.D is unknown and pop h J% /J
sample variance = Jk =
L/&
 FinQuiz Formula Sheet CFA Level I 2016

sample S.D = Jk kk is another chi square random (where V = most recent closing price
sample error of the sample mean variable with one n degrees of and Vx = closing price x days ago)
F freedom Alternate Method to calculate M =
difference = = "
L
100
"
12. Spearman Rank Correlation = 7
8. Chi Square Test Statistic (for test 6 LM[& &k
concerning the value of a normal =1 5. Relative Strength Index = RSI = 100
k 1 &ff
L/& F where
population variance) k = where For small samples rejection points for &'NF
h
R axHLTI7
1 = k = the test based on 7 are found using RS =
iOL axHLTI7
m
h /
table.
=
L/& For large sample size (e.g. n>30) t-test 6. Stochastic Oscillator (composed of two
can be used to test the hypothesis i.e. lines %K and %D):
9. Chi Square Confidence Interval for 2 &/k 7
variance =
1 7k &/k Q/B&
L/& F % = 100 where:
Lower limit = L = and Upper limit z&/B&
/
Reading 12: Technical Analysis C = latest closing price, L14 = lowest
L/& F
=U==
price in last 14 days, H14 is highest
%/
1. Relative Strength Analysis = price in last 14 days
%D = Average of the last three %K
10. F-test (test concerning differences between values calculated daily.
variances of two normally distributed
F%
populations) F = 2. Price Target for the 7. Put/Call Ratio (Type of Sentiment
F
Head and Shoulders = Neckline Indicators) =


&k = 1 & &k = (Head Neckline)
2 k Inverse Head and Shoulders =
8. Short Interest Ratio (Type of Sentiment
& = & 1 Neckline + (Neckline Head)

Indicators) =
k = k 1
' ' .'
3. Simple Moving Average =

11. Relation between Chi Square and F- 9. Arms Index TRIN i.e. Trading Index (Type
% 4. Momentum Oscillator (or Rate of Change of Flow of funds Indicator) =
distribution = = . where: =

L
Oscillator ROC):
1O.OP KJ~HL g77SI7 1O.OP iIawML g77SI7
&k is one chi square random variable "OwS.I OP KJ~HL g77SI7"OwS.I OP iIawML g77SI7
with one m degrees of freedom Momentum Oscillator Value M = (V-
Vx) 100
 FinQuiz Formula Sheet CFA Level I 2016

Reading 13: Demand & Supply Analysis: 6. Total Surplus = Total value Total
Introduction variable cost %
3. Slope of Budget Constraint Line = =


1. Slope of the demand curve = 7. Society Welfare = Consumer surplus + %
Producer surplus
%
4. Marginal Rate of Substitution = =

8. Price Elasticity of Demand =
2. Slope of the supply curve = %
&' "
&' "
%

Q2 Q1
Reading 15: Demand & Supply Analysis: The
3. Consumer Surplus = Value that a %Q (Q1 + Q2 ) 1
2 Firm
=
consumer places on units consumed %P P2 P1
Price paid to buy those units 1. Profit = Total revenue Total cost
2 ( P1 + P2 )
1
Area (for calculating Consumer
Surplus) = (Base Height) = (Q0 2. Accounting Profit = Total Revenue
9. Income Elasticity of Demand =
P 0) % Explicit Costs (or Accounting costs)
=
%
4. Producer Surplus = Total revenue received Q2 Q1 3. Economic Profit
from selling a given amount of a good = Total Revenue Explicit Costs
%Q (Q1 + Q2 ) 1
2
Total variable cost of producing that = Implicit Costs or
amount %I I 2 I1
= Accounting Profit Implicit Costs
2 ( I1 + I 2 )
1
or
Total revenue = Total quantity sold = Total Revenue Total Economic
Price per unit 10. Cross Elasticity = Costs
%
Area (for calculating Producer
%
Surplus) = (Base Height) = 4. Economic costs = Explicit costs + Implicit
{(Q0) (P0 intercept point on y- costs
axis**)} 5. Normal Profit = Accounting Profit
Reading 14: Demand & Supply Analysis:
Consumer Demand Economic Profit
**where supply curve intersects y-axis
! " 6. Accounting profit = Economic Profit +
1. Marginal Utility =
5. Total Surplus = Consumer surplus + #$ Normal Profit
Producer surplus
2. Equation of Budget Constraint Line = (PX
QX ) + (PY QY)
 FinQuiz Formula Sheet CFA Level I 2016

7. Economic rent = (New Higher Price 17. Profit can be increased by increasing !
25. Marginal Product = =
-,
after in Demand Previous Price before output when MR> MC ! .
in Demand) QS before in Demand / 01$
18. Profit can be increased by decreasing
8. Total Revenue (TR): output when MR< MC 26. Least-cost optimization Rule:
&' -,
= Price Quantity or =
-,
= Sum of individual units sold 19. Break-even price: P = ATC Output &' 2$ #
level where Price = Average Revenue =
Respective prices of individual Units 2 #

sold = (Pi Qi) Marginal Revenue = Average Total Cost

where, Total Revenue = Total Cost. 27. Profit is maximized when: MRP = Price or
9. Average Revenue (AR) =
! )* cost of the input for each type of resource
20. Firms earn Economic Profits when Price > that is used in the production process
Average Total Cost
! )*
10. Marginal Revenue (MR) = 28. Marginal Revenue product = Marginal

21. Profits occur when Total Revenue (TR) Product of an input unit Price of the
11. Total Variable Cost = Variable Cost per Total Cost (TC) & when Price = Marginal Product = Price of the input =
Cost firm will continue operating. ! )*
unit Quantity Produced

12. Total Cost = Total Fixed + Total Variable 22. Losses are incurred when there are
29. Surplus value or contribution of an input to
Operating profits (Total Revenue
firms profit = MRP Cost of an input
13. Average total cost (ATC) = Variable Cost) but Total Revenue < Total
! #$ Fixed Cost + Total Variable Cost AND
= Avg. Fixed Cost + Avg. Reading 16: The firm & Market Structures
when Price = Marginal Cost while losses
Variable Cost are < fixed costs firm will continue
1. In perfect competition, Marginal revenue =
operating.
! #$ Avg. Revenue = Price = Demand
14. Marginal cost (MC) =

23. Losses are incurred when there are
Operating losses (Total Revenue 2. Marginal Revenue = Price 1
15. Marginal Variable Cost =
! +, #$ Variable Cost) AND when losses fixed
&
7$
costs firm will shut down.
3. Concentration Ratio =
$$ *$ 2 '$ &f $
16. Marginal revenue (in perfect competition) 24. Average Product =
!
! &1 $
-,
= Avg. Revenue = Price = Demand
 FinQuiz Formula Sheet CFA Level I 2016

4. Herfindahl-Hirshman Index = Sum of the

squares of the market shares of the top N 9. National Income = Compensation of 17. Private Sector Saving = Household Saving
companies in an industry employees + Corp & Govt enterprise + Undistributed Corporate Profits +
profits before taxes + Interest income + Capital Consumption Allowance
unincorporated business net income + rent 18. GDP = Household consumption + Private
Reading 17: Aggregate Output, Prices & + indirect business taxes less subsidies Sector Saving + Net Taxes
Economic Growth
10. Total Amount Earned by Capital = Profit + 19. Domestic saving = Investment + Fiscal
1. Nominal GDP t = Prices in year t Capital Consumption Allowance balance + Trade balance
Quantity produced in year t
11. PI = National income Indirect business 20. Trade Balance = Exports Imports
2. Real GDP t = Prices in the base year taxes Corp income taxes Undistributed
Quantity produced in year t Corp profits + Transfer payments 21. Fiscal balance = Government Expenditure
Taxes = (Savings Investment) Trade
3. Implicit price deflator for GDP or GDP 12. Personal disposable income (PDI) = Balance
deflator = Personal income Personal taxes OR GDP 22. Average propensity to consume (APC) =
* $ (Y) + Transfer payments (F) (R/E + 8''' #$

* ,$ $ )
Depreciation) direct and indirect taxes
100
(R)
23. Quantity theory of money equation:
4. Real GDP = [(Nominal GDP / GDP Nominal Money Supply Velocity of
13. Business Saving = R/E + Depreciation
deflator) 100] Money = Price Level Real Income or
Expenditure
/
14. Household saving = PDI - Consumption
5. GDP deflator = 100 expenditures - Interest paid by consumers
)
24. % in unit labor cost = % in nominal
to business - Personal transfer payments to
wages - % in productivity
6. GDP = Consumer spending on final good foreigners
& services + Gross private domestic invst
25. Economic growth = Annual % in real
+ Govt. spending on final goods & services 15. Business sector saving = Undistributed
GDP
+ Govt. gross fixed invst + Exp Imp + corporate profits + Capital consumption
Statistical discrepancy allowance
26. Total Factor Productivity growth = Growth
in potential GDP [Relative share of labor
7. Net Taxes = Taxes Transfer payments 16. Total Expenditure = Household
in National Income (Growth in labor) +
8. GDP = National income + Capital consumption (C) + Investments (I) +
[Relative share of capital in National
consumption allowance + Statistical Government spending (G) + Net exports
Income (Growth in capital)]
discrepancy (X-M)
 FinQuiz Formula Sheet CFA Level I 2016

2. Money Multiplier = where, Net taxes = taxes transfer

27. Growth in potential GDP = Growth in & payments, t = net tax rate
)$* )C $*
technology + (Relative share of labor in
National Income Growth in Labor) + 9. Fiscal Multiplier (in the absence of taxes)
3. Narrow money = M1= currency held
(Relative share of capital in National = 1/(1 - MPC)
outside banks + checking accounts +
Income Growth in capital] MPS = 1 MPC.
travellers check
Total increase in income and spending
28. Capital share =Corporate profits + net = Fiscal multiplier G
4. Broad money = M2 = M1 + time deposits
interest income + net rental income +
+ saving deposits
(depreciation/ GDP) 10. Fiscal Multiplier (in the presence of taxes)

7 #$
5. M3 = M2 + deposits with non-bank
29. Labor share = financial institution MPC (with taxes) = MPC (1 - t)

&
Fiscal multiplier =
&/)$Q &/G
Reading 18: Understanding Business Cycles 6. Quantity Theory of Money = M V = P Total in income and spending =
Y where, Fiscal multiplier G
1. Price index at time t2 = M = Quantity of money Initial in consumption due to
"HwSI OP GxI QO.7S.RGMOL yH7{IG HG G
100 V = Velocity of circulation of money reduction in taxes = MPC tax cut
"HwSI OP GxI QOL7S.RGMOL yH7{IG HG G %
9 k
P = Average price level amount
Inflation Rate = 1 Y = Real output
&ff Total or cumulative effect of tax cut =
multiplier initial change in
2. Fisher Index = (where, IL = 7. Neutral Rate = Trend Growth + Inflation consumption
Laspeyres index and Ip = Paasche Index) Target
11. Cumulative multiplier =
3. () = 8. Impact of Taxes and Government * * 2 < $
! , $ 2 <1 Spending: The Fiscal Multiplier % OP Di$
. 2 <1 The net impact of the government sector
on AD: Reading 20: International Trade & Capital
/
4. Velocity of money = G T + B = Budget surplus or Budget Flows
&
deficit
9$
Reading 19: Monetary & Fiscal Policy where, G = government spending , T 1. Terms of trade =
$
=taxes, B =transfer benefits
1. Total Money created = New deposit/ Disposable income = Income Net 2. Terms of Trade (as an index number) =
Reserve Req taxes = (1 t) Income 8*' 9$
8*' $
 FinQuiz Formula Sheet CFA Level I 2016

Forward rate as a % of spot rate =

3. Net exports = Value of a country's (exports 3. Real Exchange Rate $/' = !/
=
&'M
F/ &'M
imports) S/
#R
#S

4. Net welfare effect = consumers surplus 11. Return on hedged foreign investment
loss + producers surplus gain + Govt. 4. Change in Real Exchange rate = (with a quoted forward rate) = P/J 1 +
UR
revenue S/R &' &
1 +
UR
1 P
S/R U !/
&' S
US
5. Closed Economys output = Y = C+I+G
&
12. Expected % change in the spot rate =
5. Direct Quote = FZ^% M /M
6. Open Economys output = Y = 1 = %G'& =
FZ &'M
C+I+G+(X-M) 6. Points on a forward rate quote = Fwd X-
Current Account Balance = X-M = Y- rate quote Spot X-rate quote
Forward points: P/J P/J =
C+I+G M /M
V< $ P/J (where is quoted
7. Forward rate = Spot X-rate + &'M X
&f,fff
7. Consumption = Income + transfers taxes interest rate period)
saving 8. Forward premium/discount (in %) =
$ /'(< $/&f,fff) 13. Relationship between the trade balance and
1
C = Yd - Sp =Y+R-T-Sp And, $ / expenditure/ saving decisions:
CA = Sp- I+ Govt surplus (or Govt saving) = Ex Im = (Sav Inv) + (T G)
= Sp- I+ (T- G- R)Sp + Sg = I + CA 9. To convert spot rate into a forward quote
(when points are represented as %) = Spot where T= taxes net of transfers
where, Sg = Govt savings exchange rate (1 + % premium or G= government expenditures)
Sp = I + CA Sg discount)
Current Account Imbalance CA = Sp 14. Price elasticity of demand = =
+ Sg I 10. Arbitrage relationship is stated as follows: % 2' C %
=
% 2' %
&
1 + J = 1 + P
Reading 21: Currency Exchange Rates
!
15. Expenditure (R) = Price Quantity = P
In case of indirect quote, Arbitrage Q
1. Foreign price level in domestic currency =
relationship is: 1 + J = % in expenditure = % R = % P
S/ P
1/P/J 1 + P P/J + % Q = (1- ) % P
&'M
2. Real exchange rate(/) = (S P )/P = =
&'M
16. Basic idea of Marshall-Lerner condition =
S (P /P )
+ ) ) 1 > 0 where,
 FinQuiz Formula Sheet CFA Level I 2016

9. Annual Depreciation Expense (Declining

x=share of exports Reading 24: Financial Reporting Standards &ff%
balance method) = Acceleration
"$
X=price elasticity of foreign demand for
factor (say 200% or 2) Net Book Value
domestic country exports
M=share of imports Reading 25: Understanding Income Statements / / *$
M =price elasticity of domestic country 10. Basic EPS =
0'2 8*' / $2$ $'
demand for imports 1. Revenue recognized on Prorated basis =
! 8 #$ 11. Diluted EPS for preferred stock =
17. Trade balance = Income (GDP) ! 2 /
0'2 8*' / $2$ /$'/< $2$ 2
Domestic expenditure = Absorption < 2* , $$ *$
2. Revenue recognized under Percentage-of-
Completion Method = % of Total cost 12. Diluted EPS for convertible debt =
Reading 22: Financial Statement Analysis: An
spent by the firm Total Contract / '8! M
Introduction *, ,/ *
Revenue 0'2 8*' $2$ /$'8
2 < 2* , $$ *$
1. Gross Profit = Revenue Cost of sales
3. Revenue recognized when outcome cannot
be reliably measured = Contract costs 13. Diluted EPS using Treasury Stock Method
2. Operating Profit or EBIT = Gross profit =
incurred
Operating costs + Other operating income
(/ / *$)
4. Revenue recognized under installment [0'2 8*' $2$'(/< $2$
3. Profit before tax = EBIT Interest expense
2$ 2$ <2 #$2 * 9$ )
method = Cash receipt ( )]
$
4. Profit after tax = Profit before tax 5. Wgtd Avg cost per unit =
Income tax expense ! #$ $ *,
! $ *, /
14. Net Profit Margin =
)*
Reading 23: Financial Reporting Mechanics
6. COGS using Wghtd Avg Cost = No of
$$
units sold Wghtd Avg cost per unit 15. Gross Profit Margin =
1. Owners Equity = Contributed Capital + )*
R.E
7. COGS using LIFO = Total cost Value of
16. Comprehensive EPS = EPS + Other
ending inventory
2. End R.E = Beg R.E + Net income Comprehensive Income per share
Dividends
8. Annual Depreciation Expense (using
Reading 26: Understanding Balance Sheets
#$/)$ +
3. Assets = Liabilities + Contributed Capital Straight-Line Method) =
7$ "$ -
+ Beg R.E + Revenue Expenses
Dividends
 FinQuiz Formula Sheet CFA Level I 2016

1. Percentage of A/C Receivable estimated to

be uncollectible = # 8$$$ 4. Purchases from suppliers = COGS +
10. Current ratio =
8< , 8/# # -,$
Increase in inventory
$$ 8/# )*,
11. Quick (acid test) =
#$2'&1, $$')*,$ 5. Cash paid to suppliers = Cogs + Increase
2. Net Identifiable Assets = Fair value of
# -,$ in inventory Increase in a/c payable
identifiable assets Fair value of liabilities
& contingent liabilities #$2'&1, $$
12. Cash ratio = 6. End Inventory = Beg inventory +
3. Amortized cost of PPE = Historical cost # -,$
Purchases COGS
Accumulated depreciation Impairment
losses 13. Long-term debt-to-equity =
! '/ , 7. End a/c payable = Beg a/c payable +
! 7C Purchases Cash paid to suppliers
4. Carrying value for PPE under revaluation
model ! ,
14. Debt-to-Equity = 8. Cash paid to employees = Salary and
= Fair value at date of revaluation ! 7C
wages expense Increase in salary and
Accumulated depreciation (if any)
! , wages payable
15. Total Debt =
! 8$$$
5. Amortized cost of PPE = Historical cost
9. End salary and wages payable = Beg salary
Accumulated depreciation Impairment ! 8$$$
16. Financial Leverage = and wages payable + Salary and wages
losses ! 7C
expense cash paid to employees

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
Reading 27: Understanding Cash Flow
10. Cash paid for other operating expenses =
Statements
Other operating expenses Decrease in
prepaid expenses Increase in other
1. End Cash = Beg cash + Cash receipts
accrued liabilities
(from operating, investing, and financing
activities) Cash payments (for operating,
11. Cash paid for interest = Interest expense +
investing, and financing activities)
Decrease in interest payable
2. End A/c Receivable = Beg A/c Receivable
12. End Interest Payable = Beg interest
+ Revenues Cash collected from
payable + Interest expense Cash paid for
customers
interest

9. Vertical common-size balance-sheet = 3. Cash received from customers = Revenue

13. Cash paid for income taxes = Income tax
^ $2 8 Increase in a/c receivable
! 8$$$ expense Increase in income tax payable
 FinQuiz Formula Sheet CFA Level I 2016

25. Cash flow per share =

14. Historical cost of equipment sold = Beg #V./ *$ !9
5. Effective Tax Rate =
/ $2$ /$ 7'$ , !9
balance equipment + Equipment purchased
End balance equipment #V.
26. Debt Coverage = 6. Vertical common size income statement =
! , $
15. Accumulated Dep on equipment sold = 27. Interest Coverage = )*
Beg balance accumulated dep + Dep #V.'$ '!9$
$
expense End balance accumulated dep 7. Horizontal common size balance sheet =
#V.
28. Reinvestment = ^ $2 k
#$2 '/ $$$
^ $2 &
16. Cash received from sale of equipment =
Historical cost of equipment sold 29. Debt payment = 8. Inventory turnover =
Accumulated dep on equipment sold + #V.
#$ $$ $ '$ $
#$2 -! ,
gain on sale of equipment 8*' *

#V.
17. Dividends paid = Beg balance of R.E + 30. Dividend payment = 9. Days of Inventory on Hand (DOH) =
*$
Net income End balance of R.E / $
* !*
31. Investing and Financing = )*
18. FCFF = Net income + Non-cash charges + #V. 10. Receivables Turnover =
8*' )*,$
Interest expense (1 tax rate) Cap exp #$2 <$ *$' ' *$

WC expenditures 11. Days of Sales Outstanding (DSO)

19. FCFF = CFO + Interest expense (1 Tax Reading 28: Financial Analysis Techniques / $
=
)*,$ *
rate) Cap exp
1. Compound Growth Rate =
% 12. Avg A/c Receivable Balance = Avg Days
20. FCFE = CFO Cap exp + Net borrowing 7 + `a aR bcdeaSf
1 Credit Sales DSO or
^' +
$
#V. Avg A/c Receivable Balance = =
21. CF to revenue = !*
/ )* -$$$ 79$$ $
2. Combined ratio = ghi
/ 7
jkl
#V.
22. Cash ROA =
8*' ! 8$$$ .'
3. Operating ROA = 13. Payables turnover =
2$
8*' ! 8$$$
8*' ,$
#V.
23. Cash ROE =
8*' $22$_ C /
4. ROA = or 14. No of Days of Payables =
/ $
8*' ! 8$$$
,$ !*
#V. ROA =
24. Cash to income =
.' / '$ 79$ &/!9
)*
8*' ! 8$$$ 15. WC Turnover =
8*' 0#
 FinQuiz Formula Sheet CFA Level I 2016

25. Monetary Reserve Requirement (Cash #V./# 79

36. Free Operating CF to Debt =
)* )$*$ 2 $ # ^1 ! ,
16. Fixed Asset Turnover = Reserve Ratio) =
8*' / V9 8$$$ $ -,$
37. Discretionary CF to Debt =
)* #V./# 9/*$
17. Total Asset Turnover = 26. Liquid Asset Requirement =
8*' ! 8$$$ ! ,
) &1, $
$ -,$
18. Pretax margin = 38. Net CF to Capital expenditures =
7'$ , 9 , $ VV./*$
27. Net Interest Margin =
)* # 9
/ $
! $ 7' 8$$$
! ,
19. Return on Total Capital = 39. Debt to EBITDA =
7^! 7^!8
28. Sales per Square Meter =
2 ' , C
)*
! ) C &$
40. Total Debt to total debt plus Equity =
/ ! ,
20. ROE = ! ,'7C
8*' ! 7C
) )*
ROE = ROA Leverage 29. Average Daily Rate =
/ )$ $
#8/#- ).7
ROE = Tax Burden Interest Burden 41. Z-Score = 1.2 + 1.4 +
!8 !8
EBIT Margin Total Asset 7^! &+ $1
/ )$ 3.3 + 0.6 + 1.0
Turnover Leverage 30. Occupancy Rate = !8 ^+ ,$
/ )$ *, $

!8
21. Return on Common Equity = 7^!
/ / *$ 31. EBIT Interest Coverage =
$$ $ ' (-$$)
8*' # 7C 42. Segment margin =
' )*
7^!8
32. EBITDA Interest Coverage =
22. Coefficient of Variation of Operating $$ $ ' )*
43. Segment turnover =
. .' ' 8$$$
Income =
8*' .' 33. FFO Interest Coverage =
VV.'$ /.' -$ 8m$$ ' (-$$)
$$ $
44. Segment ROA =
23. Coefficient of Variation of Net Income = ' 8$$$
. /
7^! ' -,$
8*' / 34. Return on Capital = = 45. Segment Debt Ratio =
8*' # ' 8$$$
7^!
24. Coefficient of Variation of Revenues = 8*' (7C'/ 9$',)
. )* Reading 29: Inventories
8*' )* VV.
35. FFO to Debt =
! ,
 FinQuiz Formula Sheet CFA Level I 2016

1. NRA = Estimated Selling Price Where, Recoverable amount = Max [(Fair tax liability currently payable + in
Estimated Costs of completion and value Costs to sell); Value in Use)] and deferred tax asset / liability
disposal Value in use = PV of Expected Future CFs Where,
Income Tax liability currently
2. Inventory amount net of valuation 6. Impairment Loss (US GAAP) = Assets payable = Taxable income Tax
allowance = Carrying amount of Inventory Fair Value Carrying Amount .If rate
Write downs Carrying amount > Undiscounted Expected in deferred tax asset / liability =
Future Cash Flows Diff b/w the balance of the
3. (NRA Normal Profit Margin) MV deferred tax asset / liability for the
NRA Reading 31: Income Taxes current period and the balance of
the previous period.
Reading 30: Long-Lived Assets 1. Deferred tax asset = Companys taxable
income > Accounting profit 9. The companys tax expense (or credit)
1. Dep Exp under Straight-line Method = reported on its income statement = Taxes
, #$ 2. Tax base of revenue received in advance =
= payable + ( Deferred tax liability -
7$ "$ -
n$ #$/7$ )$ $*' + Carrying amount Any amount of revenue Deferred tax asset)
7$ "$ - that will not be taxed at a future date Where,
2. Dep Exp under Units-of-Production 3. Reported Effective Tax Rate = Income Tax liability currently
Method = Depreciable Cost !9 9$
payable = Taxable income Tax
2 9 8'
7$ * #
rate
4. Deferred tax liability = Carrying amount Deferred tax liability = (carrying
3. Carrying amount under cost model = of asset > Tax base of asset amount tax base) tax rate
Historical Cost Accumulated Dep or Deferred tax asset = (tax base
Amortization 5. Deferred tax asset = Carrying amount of carrying amount) tax rate
asset < Tax base of asset
4. Carrying amount under revaluation model 10. Tax base of a liability = Carrying amount
= Fair value at the date of revaluation 6. Deferred tax asset = Carrying amount of of the liability Amounts that will be
Any subsequent Accumulated Dep or liability > Tax base of asset deductible for tax purposes in the future
Amortization
7. Deferred tax liability = Carrying amount of Reading 32: Non-current (Long-term)
5. Impairment Loss (IFRS) = Recoverable liability < Tax base of asset Liabilities
Amount Net Carrying Amount
8. Companys tax expense (or credit) 1. Annual Interest Payment = Face Value
reported on its income statement = Income Coupon Rate
 FinQuiz Formula Sheet CFA Level I 2016

2. Sale proceeds of bond = Sum of PV of the bonds at the beginning of the period 20. Cost of sales = Carrying amount of the
Interest Payments + PV of Face value of Effective interest rate leased asset PV of the estimated
Bond unguaranteed residual value
12. Bond Interest Payment under effective 21. Interest Revenue = Lease receivable at the
3. When Face value - Sale proceed is > zero, interest rate method = Face value of the beg of the period Interest rate
discount bonds Contractual (coupon) rate
22. Net interest expense = Beg Net pension
4. When Face value Sale proceed is < zero, 13. Amortization of the discount or premium liability Discount rate
premium under effective interest rate method =
Bond interest expense Bond interest 23. Net Interest income = Beg Net Pension
5. Bond payable = Face value (+) Discount payment asset Discount rate
(Premium)
14. Bond Discount/Premium Amortization 24. Reported pension expense = Pension costs
6. Total Interest Expense (in case of discount) under Straight-line Method = Expected return on Pension plan assets
= Periodic interest payments + ^ $ 25. Funded Status = PV of the Defined benefit
/ $ $
Amortization of Discount obligations Fair value of the plan assets
15. No of shares subscribed when warrants are
7. Total Interest Expense (in case of 8''' ,
premium) = Periodic interest payments - exercised = Reading 33: Financial Reporting Quality
*
Amortization of Premium shares subscribed per lot

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
#V
,
0#
2'$
*$)
,
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
Reading 34: Financial Statement Analysis:
Applications
1. Companys 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 =
('

11. Bond interest expense under effective the asset and PV of the min lease payments
) #V/# 9
interest rate method = Carrying value of 4.
! ,
 FinQuiz Formula Sheet CFA Level I 2016

14. Tangible B.V = Total stockholders equity 1. Incremental CF = CF with a decision - CF

5. Inventory value adjusted to FIFO basis = Goodwill Other intangible assets without that decision
End Inventory value under LIFO + End 2. NPV = PV of cash inflows - IO =
15. Price to tangible BV ratio =
!', ^+
LIFO reserve balance n
AT CFs at time t
NPV = t
IO
16. Adjusted debt-to-equity ratio = (1+ Req RoR )
6. COGS adjusted to a FIFO basis = COGS ) ,'+ ' $
t=1

under LIFO (End LIFO reserve Beg ) 7C

LIFO reserve) 3. Avg Accounting RoR (AAR) =
17. Adjusted debt-to-asset ratio = 8*' / & 9$ , $
8*' ^+ *$
7. Useful life of the companys overall asset ) ,'+ ' $
) 8$$' + ' $ + #V$ /+
base that has passed =
8 4. PI = =1+
. .
$$ 7 18. Adjusted Asset Turnover ratio =
$
8. Avg age of the asset base = ) 8*' $$$'+ ' $ 5. Value of a company = Value of companys
8 existing invst + Net PV of all of
8 9$ 19. PV of future operating lease payments = companys future invst
+ $ $
Total Future
9. Remaining useful life of the asset = ! # -$ $
Reading 36: Cost of Capital
/ 7 ( ) Operating Lease Payments
8 9$
1. WACC = wdrd (1 t) + wprp + were
20. Interest expense = Interest PV of the
10. Avg depreciable life of the assets at lease payments
$$ 7 2. Debt-to-Equity Ratio conversion into
installation =
8 9$ weight (i.e. Debt / (Debt + Equity) =
21. Depreciation expense estimated on jcvw
xyzew{
11. % of asset base that is being renewed straight-line basis = jcvw
+ 2 $ $ &'
xyzew{
through new capital investment = / $ $ $
#9
$$ 7' #9 3. Optimal Capital Budget is the point where
22. Adjusted Interest Coverage ratio = MC of capital = Marginal return from
12. Adjusted BV = Total stockholders equity EBIT + rent exp Dep exp investing
Goodwill payments + expense
4. After-tax cost of debt = Before-tax
13. Adjusted Price to BV ratio = * associated with the operating lease Marginal Cost of Debt (1 firms
1 p obligations marginal tax rate)
8m$ ^+

Reading 35: Capital Budgeting

 FinQuiz Formula Sheet CFA Level I 2016

5. Preferred Stock Price per Share

1 * 2 15. Sovereign yield spread = Govt bond yield
=
#$ 1
(denominated in developed countrys
currency) T.B yield on a similar maturity Reading 37: Measures of Leverage
6. Expected Return on Stock I (under CAPM)
bond in developed country
= E (Ri) = RF + i [E (RM) RF]
1. Contribution Margin (CM) = (# of units
16. Country equity premium = Sovereign yield sold) [(price per unit) - (variable cost per
7. Expected Return on Stock I = E (Ri) = RF +
8 . 7C 9
unit)]
i1 (Factor risk premium)1 + i2 (Factor spread 8 . $*' , &1 2. Per unit CM = Price per unit - Variable
risk premium)2+..+ij (Factor risk $ * 1
cost per unit
premium)j
17. Cost of equity = Ke= RF + [(E(RM)-RF) +
% 3. Operating income = CM Fixed Operating
8. Cost of Equity = = +g CRP]
h Costs

18. Breakpoint = % .' 7^!

9. Expected Growth Rate of Dividends 4. DOL =
8 <22 $_ $ $ % "$

g = (1 - ) ROE < $ 2 $ or
7
g = retention rate ROE #&
DOL=
19. Cost of Capital (hen flotation costs are in #&/ V9 .' #$
%
10. Companys stock returns = R = a + monetary terms = r = +g
h /V % /
bR 5. DFL = or
% .'
#&/ V9 . #$
20. When FC are in terms of % of the share #&/V9 . /V9 V #$
11. Unlevered of Comparable Company = %
, abdvc price: Cost of Equity = r = +g
h /V
", = % /
&' &/abdvc
jabdvc 6. DTL= = DOL DFL =
xabdvc % / "$
21. If FC are not tax deductible: NPV = PV of #&
Cash Inflows IO (FC in % New #&/V9 . /V9 V #$
12. Levered of Project =
Equity Capital)
R(O 7. Break-even Revenue = (Variable cost per
B, R(O = , aO.R 1 + 1 R(O
R(O 22. If FC are tax deductible: NPV = PV of unit Break-even Number of Units) +
Cash Inflows IO [(FC in % New Fixed Operating costs + Fixed Financial
Z Cost
13. H77IG = r
Equity Capital) (1 Marginal Tax Rate)]
&' &/G

23. Asset = (Debt Proportion of Debt) + 8. Breakeven Number of units =

i V9 .' #$$'V9 V #$$
14. I}SMG` = H77IG 1 + 1 (Equity Proportion of Equity)
/+, $
 FinQuiz Formula Sheet CFA Level I 2016

9. EPS after buyback = 5. Discount-basis Yield =

7'$/8 9 #$ V$ V */2$
2$ .$' ^,1

V +
Reading 38: Dividends & Share Repurchases: opf
Basics / $
10. Ex-dividend value of share = Stock price
Dividend per share
1. Companys payout for the year = Cash 6. Wght Avg collection period = wghts
dividends + Value of shares repurchased in Avg no of days to collect accounts within
11. Market value of Equity after distribution of
any given year each aging category
cash dividends =
[(# $2$ /$) (&+ $2) #$2 *]
2. Dividend Payout ratio = # $2$ /$ Where, Weights = % of total receivables in
# $2 $2 *$
12. Post-repurchase share price = each category
/ *, $2$
# $2$ /$ (&+ $2
<2 2 2$] 8*' V
3. EPS after Dividend = EPS before Dividend ( # $2$ /$/# $2$ ( , 2$ , #
7. Float Factor = =
8*' $
2$ /$ , * 8*' V

2$ /$ * aw azw aR cf jcbafewcS
Reading 39: Working Capital Management `a aR j{f

4. Stock Price after Dividend = Stock Price

1. Operating cycle = No of days of inventory Where, Float =Amount of money that is in
before Dividend EPS after Dividend
+ No of days of receivables transit b/w payments (by customers) and
funds (usable by co)
5. Total Market Value after Dividend =
2. Net operating cycle = No of days of
Shares outstanding after Dividend Stock
inventory + No of days of receivables No 8. Value of stretching payment = A/c payable
price after Dividend
of days payables Co's opportunity cost for ST funds
6. Stock price after 2-for-1 stock split =
1 , $1 $ 3. Money Market Yield = 9. Cost of Trade Credit = 1 +
k V */2$
ghi
2$ $
opf 1
&/$
7. EPS after 2-for-1 stock split = / $
7 , $1 $
where n = days beyond discount period
k
4. Bond Equivalent Yield = 10. Cost of Line of Credit =
V */2$ $'#
8. DPS after 2-for-1 stock split =
2$ - 8
, $1 $
opu $
k
/ $
11. Bankers Acceptance Cost = =
/ $
$
- /$
 FinQuiz Formula Sheet CFA Level I 2016

12. Commercial Paper Cost = w /w% 12. After-tax nominal R = Total R - Any
2. Capital Gain =
w%
$'_ $ $$'^1 $$ allowance for taxes on realized gains
- /$

3. Dividend Yield = 1 13. (1 + Nominal R) = (1 + Real Rf R) (1 +
h
13. Annualized cost = Cost 12
4. 3-Yr HPR = [(1 + R1) (1 + R2) (1 + Inf) (1 + RP)
R3)]1/3 1
Reading 40: The Corporate Governance of
14. (1 + Real R) = (1 + Real Rf R) (1 + RP)
Listed Companies
5. Arithmetic mean (AM) R = M =
N% 'N ''N.% 'N & * (&'/ ))
= G[& MG 15. (1 + Real R) =
* * (&')

NZ /
Reading 41: Portfolio Management: An 16. Var of a Single Asset = k = %

6. Geometric R for n periods = R DM = *

Overview &
1 + & 1 + k 1 + L L 1
)w /)
17. Sample Variance = s k = e%
1. NAV of bond mutual fund = !/&
! #V !
(* 2 , 2 ) 7. IRR = [f &')) w =0
/ $2$ 18. Cov of R b/w two assets = Cov (Ri,Rj) =
ij i j
2. New Shares that need to be created = 8. Annual Return (Ann R):
8 , *$ 2 V Ann R = (1 + Quarterly R) 4 1 19. Portfolio Var = k = &k &k + kk kk +
/8+ ! * & V
12
Ann R = (1 + Monthly R) 1 2& k Cov R& , R k = &k &k + kk kk +
3. New NAV of the Fund = NAV or Total Ann R = (1 + Weekly R) 52 1 2& k &k & k
value of a Mutual Fund + Amount to be Ann R = (1 + Daily R) 365 1
invested in the Fund 20. Portfolio S.D. = Portfolio Variance
Weekly R = (1 + Daily R) 5 1
Weekly R = (1 + Annual R) 1/52 1 21. Cov b/w asset 1 & asset 2 = Correlation of
4. No of shares need to be retired =
8 , <2< 2 V Return b/w two assets S.D. of asset 1
/8+ ! * & V 9. Portf R (for Two Assets) = (Wght of Asset S.D. of asset 2
1 R of Asset 1) + (Wght of Asset 2 R
Reading 42: Risk Management: An of Asset 2) 22. Correlation of Return b/w two assets =
Introduction #* ) ,/< < $$$
10. Gross R = R Trading exp other exp .. $$ & .. $$ k

directly related to the generation of returns.

Reading 43: Portfolio Risk & Return: Part I 23. 1 + Expected Return =1 + E R =
1 + r 1 + E 1 + E RP
11. Net R = Gross R - All managerial and
1. Total Return = Capital Gain (or Loss) + administrative exp
Dividend Yield
 FinQuiz Formula Sheet CFA Level I 2016

24. Utility of an Invest = Expected Return - 14. Weight of Non-market security should be
& 3. Multi-Factor Model: M P = proportional to
Risk Aversion Coefficient
k { 82
[& M ( ) = M . P + = i / 2i
Var of Invest {
/$$ *
[k M ( )
15. Total Weight of Non-market security
25. Expected R of Portfolio = E R = & R +
4. Single-Index Model: Ri Rf = i(Rm Rf) #
%
1 & E R should be proportional to = #
+ ei %

5. Factor weight associated with each factor =

26. Risk of Portfolio = k = &k k + ! )$1 16. Information Ratio =
(1 w& )k k + 2& 1 & &k = ! &1 )$1 82
1 & k k & p = (1 w1) i /$$ )$1
27. Capital Allocation Line (CAL) = E R = 6. R = P + R . P =
R +
7 )e /)R
= R + w& & + wk k E R R 17. Expected Return of Portfolio (under
e
Arbitrage Pricing Model) = E R = R V +
28. Portfolio Risk = &k &k + kk kk + 7. Assets Beta = , + + 1 ,1
# ,< $$ 1 .. 8$$
2& k Cov R& , R k
.. &1
8. Portfolio Beta = = 18. Return on an Asset in excess of 1-Month
29. In portfolio of many asset = T-Bill Return (under four factor model) =
[& w ; [& w =1
E R = + ,&! MKT +
/
E R = [& E R ,&^ SMB + ,n&- HML + ,"& UMD
)b /)R
k =

+
(//&)
Cov 9. Sharpe Ratio =
/ /
b
Reading 45: Basics of Portfolio Planning &
(//&) N /N Construction
= + k 10. Treynor Ratio =
/ /
k b
11. M = R $ RP . P 1. Investors Expected Utility from Portfolio
30. New Asset should be included in the Portf

7 )c /)R 7 )b /)R = Up = E (Rp) 2p

only if > <,
c b 12. Jansens Alpha = R = R
P + R . P 2. Tactical Asset Allocation (TAA) Return
Reading 44: Portfolio Risk & Return: Part II contribution = Actual return of the
13. Security Characteristic Line (SCL) = R portfolio Return that would have been
1. Total Risk = Systematic risk + R = + R R earned if the asset class weights were equal
Nonsystematic risk = 2i 2m + 2e to the policy weights

2. Total risk of for a well-diversified portfolio

= Systematic risk = im Reading 46: Market Organization & Structure
 FinQuiz Formula Sheet CFA Level I 2016

1. Total return to a Leveraged Stock Purchase 7. Max leverage ratio for position financed by 6. Total return of each security = TRi =
)' 7C/. min margin requirement =
=
.
where,
&
P1i P0i + Inci
Remaining Equity = IO Purchase & ' C P0i
commission + (-) Trading g(l) Margin i
paid + Div received Sales commission Reading 47: Security Market Indices
N " P P + Inci %
Total Return wi $ 1i 0i '
paid i=1 # P0i &
OR 1. Value of a price return index =
Remaining Equity = Proceeds on sale N Over Multiple Time Periods:
Payoff loan Margin i paid + Div received
Sales commission paid
n P
i =1
i i 7. Value of Price Return index at time t =
VPRI = VPRIT = VPRI0 (1 + PRI1) (1 + PRI2) (1 +
D PRIT)
2. ROE (based on leverage alone)
= Leverage (in times) stock price return For Single Period: 8. Value of Total Return index at time t =
(in %) 2. % Change in value of Price return of VTRIT = V TRI0 (1 + TRI1) (1 + TRI2) (1 +

3. Price of stock below which a margin call

VPRI 1 VPRI 0 TRIT)

will take place (P):

index Portfolio = PR I =
VPRI 0 9. Weight of security i under price weighting
' $ '(/ 1 )
= =
$

$ $ $$
Maintenance Margin Requirement (%)
3. Price Return (Ind constituent security):PR I
10. Weight of security i under equal weighting
4. Total cost of placement to the issuing firm Pi1 Pi 0 =
&
in IPO ($) = / $$ 2 9

= Gross proceeds received by the issuing Pi 0

firm Net proceeds received by the issuing 11. Weight of security i under market-cap
firm 4. Price return of the index: PR I = weighting =
/f $2$ /$ 2
N
P Pi 0 ` / $2$ /$ 2
5. Total cost of placement to the issuing firm wi i1 e

P Where Si = Security i
($$ $ * , V/ i =1 i0
/ $ * , V
in IPO (%) =
/ $ * , V 12. Weight of Si under Mkt Cap weighting =
where IF = Issuing firm 5. % in value of Total return of Index V $2$ /$ 1 $2$
2 $
VPRI 1 VPRI 0 + IncI (V $2$ /$ &1 $2$ /$
&ff% 2 $ )
6. Max leverage ratio = VPRI 0
% 7C
 FinQuiz Formula Sheet CFA Level I 2016

13. Fundamental weight on security i = Reading 50: Introduction to Industry & D0 (1 + g ) D0 (1 + 0) D0

V $p $ Company Analysis V0 = = =
`(V $p $ ) rg r 0 r
e

*Book value, cash flow, revenues, earnings, 9. Value of a pref stock (non-callable, non-
Reading 51: Equity Valuation: Concepts & convertible) with maturity at time n =
dividends, & number of employees.
Basic Tools L
f
f = +
Reading 48: Market Efficiency (1 + )G 1+ L
1. Value of a share of stock today = G/&
- 79 *
[& (&'C ).) $1)^
Gordon Growth Model:
Reading 49: Overview of equity Securities If an investor intends to buy and hold a share 10. Value of a share of stock =
for 1 yr: D (1 + g ) D1
1. Equity securitys Total Return = V0 = 0 = , g<r
rg rg
$2/2$ $2'$2/$1 * 2. Value of a share of stock today =
2$ $2 79 * & '79 $' &
(&'C )) $1)^& 11. Sustainable dividend growth rate =
2. ROE in yr t = g = ROE b
/ ( . 22$) 3. Value of a share of stock for n holding where b = earnings retention rate = (1 -
8*' ! ^+ 7C Dividend payout ratio)
period or investment horizon =
OR L 79 *
/ ( . 22$) G[& &'C ) $1 w +
ROE = Two-stage valuation model:
22$_ C ,' 79 $
12. Value of share today = V0 =
&'C ) $1
L
G
3. MV of equity = Mkt price per share f 1 + 7 L
f = +
Shares O/s 4. CFO = NI + Non-cash exp Invst in WC (1 + )G (1 + )L
M[&
L'&
! n_ C 5. FCFE = CFO FCInv + Net Borrowing L =
4. BV of equity per share = B
2$ /$
L'& = f (1 + 7 )L 1 + B
6. Value of a share for a non-div-paying
&1 $2
5. Price-to-book ratio = - V#V7
^+ C $2 stock = [& &'C ) $1 w f % /7%
13. Justified P/E = = =
7& /' /'

6. ROE = Net profit margin Asset turnover 7. Req RoR on sharei = Current expected Rf
/ '$ 14. EV = MV of stock + MV of debt Cash
Financial leverage = rate + Beta i [MRP]
/ $$ and cash Equivalents
/ $$ 8*' $$$

8*' $$$ 8*' C 8. Value of a pref stock (non-callable, non-
15. Asset-based value = Value of Equipment
convertible) =
and inventory Value of Liabilities
 FinQuiz Formula Sheet CFA Level I 2016

3. Bond price = ! APRm $ ! APRn $

m n

Reading 52: Fixed Income Securities: Defining PMT PMT PMT + FV 11. #1+ & = #1+ &
Elements PV = 1
+ 2
+... + " m % " n %
(1+ r) (1+ r) (1+ r) N
1. Inf adj Principal amount of a zero-coupon- 12. Current yield =
/< /.
indexed bond 4. % Price change = $ * * 2
.
V
= [Par value (1 + CPI)]
2. Inf adj coupon payment for an interest- 5. Bond price (given sequence of spot rates) 13. Price of Floating-rate note = PV=
indexed bond = PV =
= [(coupon rate Par value) (1+CPI)] PMT PMT PMT + FV (I + Qm) FV (I + QM ) FV (I + QM ) FV
1
+ 2
+... + m m m
+ FV
(1+ Z1 ) (1+ Z 2 ) (1+ Z N ) N 1
+ 2
+... + N
3. Inf adj Principal amount of a capital- " I + DM % " I + DM % " I + DM %
$1+ ' $1+ ' $1+ '
indexed bond # m & # m & # m &
= [Par value (1 + CPI)] 6. Full price of bond = Flat price of bond +
Accrued interest 14. Price of Money Market Instrument =
4. Inflation adjusted coupon payment for a
G
# Days &
capital-indexed bond 7. Accrued interest = AI = PV = FV %1 DR (
* $ Year '
= [Par value (1 + CPI)] coupon rate
8. Full price of a fixed-rate bond between
15. Market Discount Rate =
Reading 53: Fixed Income Markets: Issuance, coupon payments = PVFull
# FV PV &
Trading & Funding
=
PMT
(1+ r)1t/T
+
PMT
(1+ r) 2t/T
+... +
PMT + FV
(1+ r) Nt/T
DR = Year ( ) %
Days $ FV ('

Reading 54: Introduction to Fixed Income 9. Full price of a fixed-rate bond between 16. Price of Money Market Instrument =
Valuation coupon payments FV
PV =
PV (1+ r) t/T " Days %
1. Amount of discount below par value = $1+ AOR '
Present value of deficiency
# Yr &
10. Interpolated yield (say for 3-year, given
2. Present value of deficiency = market discount rates for 2 and 5 yrs) =
# /&1 $ * o/k
(Average yield for 2 year bonds) +
[& &'&1 $ w u/k
(average yield for 5 year bonds average
17. Add-on rate =
yield for 2 year bonds)
 FinQuiz Formula Sheet CFA Level I 2016

2. Monthly CF for a MPS = Monthly CF of $ /.

! Yr $ ! FV PV $ 7. DSC ratio =
, $*
AOR = # &# & underlying pool of mortgages - Servicing
" Days % " PV % fee - Other fees
Reading 56: Understanding Fixed Income Risk
& Return
Relation b/w two spot rates and Implied 3. Pass-through rate = Mortgage rate on the
Forward Rate: underlying pool of mortgages Servicing
1. Interest-on-interest gain from
Fee - Other fees
compounding = Future value of reinvested
18. (1 + zA)A (1 + IFRA,B-A)B-A = (1 + zB)B
coupons - Total amount of coupon
4. SMM = Pre-pmt for month (Beg
payments
Z-spread over the benchmark spot curve: mortgage balance for month Scheduled
Where,
Price of a bond = principal re-pmt for month)
FV of Reinvested Coupons = [CR(1+
PMT PMT PMT + FV
PV = + +... + RR)n-1] + [CR(1+RR) n-2] ++ [CR(1+
(1+ z1 + Z)1 (1+ z2 + Z)2 (1+ zN + Z) N 5. CPR = 1 (1 SMM)12
RR)n-n]
Total Amount of Coupon Pmt = CR Par
19. OAS = Z-spread Option value (bps per 6. CF Construction (Monthly CF for MPS):
value No of periods
year) Net interest = (Beg mortgage
balance Pass-through rate) / 12
RR = Re-invstmnt rate per period
20. G-spread = Yield-to-maturity on Corporate Scheduled principal re-pmt = CR = coupon rate
bond Yield-to-maturity on a government Mortgage pmt Gross i- pmt
bond Gross i- pmt = (Beg mortgage 2. Realized RoR on Bond=
balance WAC) / 12 %
)*$ #$'
21. Interpolated Spread = I-spread = Yield to Pre-pmt for month = SMM
m
) &
maturity of the bond - Linearly 1
(Beg mortgage balance for month ^
interpolated yield to the same maturity on Scheduled principal re-pmt for
an appropriate reference curve month) 3. Carrying value of bond (if bond purchased
Total principal re-pmt = below par) = Purchase price + Amortized
Reading 55: Introduction to Asset Backed Scheduled principal re-pmt + amount of Discount
Securities Prepayment
Beg mortgage balance for the 4. Carrying value of a bond (if bond
1. Loan-to-value ratio (LTV) =
following month = Beg mortgage purchased above par) = Purchase price
_ $ 2$
8 &''
balance for the month Total Amortized amount of Premium
Principal Pmt
Projected CF for MPS = Net i- 5. Amortized amount for 1st year = Bond
pmt + Total principal re-pmt Price after 1-yr - Initial bond price
 FinQuiz Formula Sheet CFA Level I 2016

1/G 23. Approx. Convexity Adjustment =

14. Macaulay D for a Zero-coupon bond =
*
6. Capital g / (l) = Sale price of Bond after n (PV ) + (PV+ ) [2 (PV0 )]
years Carrying value of Bond after n
15. Macaulay D for a Perpetual bond = (1+ r) / (Yield)2 (PV0 )
years
r 24. Convexity of a zero coupon bond =
16. Avg Mod D for the Portf =
7. Macaulay Duration = &+ ^ & [ N (t / T )] [ N +1 (t / T )]
( " PMT % " PMT % " PMT + FV %, Mod D of Bond 1
*
*
$
MacDur = )(1 t / T )$
(1+ r )
1t/T ' $
' + ( 2 t / T )$ (1+ r )
2t/T ' $
' +... + ( N t / T )$ (1+ r )
Nt/T '*
'*-
! &+
&+ ^ k
(1+ r)2
* $ PV Full
' $ PV Full ' $ PV Full '* + Mod D of Bond 2 +
*+ $
#
'
&
$
#
'
&
$
#
'
&*. ! &+
&+ ^ /
OR + Mod D of Bond N 25. Money Convexity vs Money Duration =
! &+ &
PV Full - (MoneyDur Yield) + [
k
' + 17. Money D = Annualized Mod D Full MoneyCon (Yield)2]
)1+ r 1+ r + #$ N ( c r )%& )
MacDur = ( , (t / T ) Bond Price
c #$(1+ r ) 1%& + r )
N
)* r - 26. Money Convexity of bond = Annual
18. Full price of Bond (in currency units) - Convexity Full Price
& Money D in annual YTM
8. Modified D =
&' 27. Effective Convexity =
(PV ) (PV+ ) #$( PV ) + ( PV+ ) [ 2 (PV0 )]%&
9. Annualized Modified D = 19. PVBP =
& 2 2

(Curve) ( PV0 ))
20. Basis Point Value (BPV) = Money
10. % PVFull = - AnnModDur Yield duration 0.0001 (1 bp) 28. Duration Gap = Bonds Macaulay
Duration Investment Horizon
11. Approx Modified D = 21. Bloombergs Risk Statistic = PVBP 100
(PV ) (PV+ ) Reading 57: Fundamentals of Credit Analysis
Full
2 (Yield) (PV0 ) 22. %PV = (-AnnModDur Yield) +
& 1. Expected Loss = Default Probability
()k
k Loss Severity given Default
12. Approx Mac Dur = Approx Mod Dur (1
+ r) Or .'
2. Operating Profit Margin =
%PV Full = (-AnnModDur Yield) + )*
& k
(PV ) (PV+ ) ()
13. Effective D = k 3. EBITDA = Operating Income + Dep +
2 (Curve) (PV0 ) Amort
 FinQuiz Formula Sheet CFA Level I 2016

4. FCF = CFO Cap exp Div Reading 58: Derivatives Markets and Max (0, ST - X) + C0
Instruments Profit from Put option =
5. Capital expenditures = Additions to P&E + Max (0, X- ST) + P0
Additions to product rights & intangibles 1. Value of the contract to the Long at
Proceeds of sale of P&E expiration = ST F0(T) 8. To eliminate arbitrage opportunity:
Forward Price should be = Spot Price
6. Total debt = ST debt + Current portion of 2. Value of the contract to the Short at 1 + % G
LT debt + LT debt expiration = F0(T) ST

7. Capital = Debt + Equity 3. Margin % in stock market = Reading 59: Basics of Derivative Pricing &
&+

1/&+

,
Valuation
&+

1
8. Yield on Corp Bond = Rf rate + Expected
Inf rate + Maturity P + Liquidity P+ Credit 1. Pricing of risky assets = S0 =
7
(!)
4. Margin Call: &''
spread
Long position: Price that would 2. Commodity = F 0, T = S0 e (r )T
trigger a margin call = IM req MM where, = Convenience yield Cost of
9. Yield spread = Liquidity P + Credit spread
req carry
Short position: Price that would
10. Return impact for smaller spread %
trigger a margin call = IM req MM 7
(!)
in price -Modified Duration Spread 3. S0 = +
&''
req
where, (theta) = Present value of the
11. Return impact for larger spread % in costs and (gamma) = Present value of
5. TED spread = LIBOR T-Bill rate
price - (Modified D Spread) + benefits
&
Convexity (Spread)2
k 6. At expiration (for option Buyer):
4. Arbitrage and Derivatives = Underlying
Value of Call option =
!
$
, asset + Opposite position in derivative =
12. Secured debt leverage = CT = Max (0, ST - X)
7^!8 Underlying payoff Derivative payoff =
Profit from Call option =
Rf return
13. Senior unsecured leverage = Max (0, ST - X) C0

,'
$
, Value of Put option = P0 =
7^!8
5. Pricing and Valuation of Forward
Max (0, X- ST)
Contracts:
Profit from Put option =
14. Total Leverage =
!
, At Expiration F (0, T) = S0 (1 + r) T or
7^!8 Max (0, X- ST) P0
S0 = F (0, T) / (1 + r) T
!
,/#$2 Value of forward (long) during
15. Net Leverage = 7. At expiration (for option Seller):
7^!8 contract life (where t < T) = Vt (0, T)
Profit from Call option =
= St F (0, T) / (1 + r) (T t)
 FinQuiz
Value of forward (short) during
contract life (where t < T ) = Vt
(0, T) = F (0, T) / (1 + r) (T t) - St
Value of forward (long) at expiration
(where t = T) = VT (0, T) = ST - F (0,
T)
Value of forward (long) at initiation
(where t = 0) = Vt (0, T) = S0 F (0,
T) / (1 + r) T = 0
Forward price of an asset with benefits
and/or costs = (S0 + ) (1 + r) T =
S0 (1 + r) T ( - ) (1+ r) T
Value of Forward contract with
benefits and/or costs during the life of
the contract = St ( - ) (1 + r) T - F
(T) / (1 + r) (T t)
6. FRAs: An example of 3 9 FRA (read as
three by nine):
Contract expires in 90 days
Underlying loan settled in 270 days
Underlying rate is 180-day LIBOR
For Synthetic FRA (take long position
in a 300-day Euro$ T.D and short
position in a 30-day Euro$ T.D
For synthetic forward position in a 90-
day zero-coupon that begins in 30 day
(buy 120 day & sell 30 day (zero
coupon bonds)
7. Pricing and Valuation of Swap Contract (a
fixed for floating swap contract):
Formula Sheet
Fixed Periodic rate =
1 - ZN
RN =
Z1 + Z 2 +.... + Z N
Where Zn are n period zero coupon
bonds (i.e. $1 discount factors)
1
Zn =
1 + ( Ln days / 360)
Value of a fixed rate side (per $1 NP)
= V fixed rate = [Fixed payment (
Z1 + Z 2 +.... + Z N )] + ($1 ZN) 11. Protective Put
Value of a floating rate side (per $ 1
NP) = V floating rate = ($1 + 1st floating
pmt) Z1
Pricing and valuation of Options:
8. Payoff of Call options: 12. Fiduciary Call
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
9. 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
10. Max Profit/Loss for Option writer/holder:
CFA Level I 2016
Max profit of option seller/writer
Option premium.
Max loss of option seller/writer
unlimited.
Max loss of option holder Option
premium
Put-Call Parity
Value PP = p0 + S0
Payoff at expiration (put out-of-the-
money) = ST.
Payoff at expiration (put in-the-
money) = (X-ST) + ST = X.
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.
13. Put-Call Parity (to avoid arbitrage) = c0 +
X / (1+r) T = p0 + S0
Synthetic long position in a call =
X
C = p 0 +S 0
(1+ r)T
 FinQuiz Formula Sheet CFA Level I 2016

Synthetic long position in a put = Value of the put = Profit = pT p0

X Maximum profit = X p0
p 0 = c 0 S 0 + Maximum loss = p0
(1+ r)T
Breakeven = ST* = X p0
Synthetic long position in an Reading 60: Risk Management Applications of 4. For Put Option Seller
X Option Strategies
underlying = S0 = c 0 + p0
(1+ r)T pT = max (0, X ST)
1. For Call Option Buyer When ST < X pT = X ST
Synthetic long position in a riskless
cT = max (0, ST X) When ST X pT = 0
X
bond = = p 0 +S0 c0 When ST X cT = 0 Value at expiration = pT
(1+ r)T When ST > X cT = ST X Profit = pT + p0
Value at expiration = cT Maximum profit = p0
14. Put-Call-Forward Parity = F0(T) / (1 + r) T Profit = cT c0 Maximum loss = X - p0
+ p0 = c0 + X/(1 + r) T Maximum profit = no upper limit Breakeven = ST* = X - p0
15. Valuing a callable bond using Binomial

Maximum loss = c0
Model: Breakeven = ST* = X + c0
Ru = Rd e2 2. For Call Option Seller
Value at time 0 = V0 = hS0 c0
Value at time 1 will either V1+ = hS1+ - cT = max (0, ST X)
c1+ or V1- = hS1- - c1- When ST X cT = 0
If the portfolio was hedged, then V+ When ST > X cT = ST X
would equal V-. Value at expiration = -cT
Profit = cT+ c0
Maximum profit = c0
Maximum loss = no upper limit
Breakeven = ST* = X +c0
3. For Put Option Buyer
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

pT = max (0, X - ST) Value at expiration: VT = ST + max (0,

Value of the call = When ST < X pT = X - ST X - S T)
When ST X pT = 0 When ST X VT = ST + X - ST = X
Value at expiration = pT When ST > X VT = ST
 FinQuiz Formula Sheet CFA Level I 2016

Profit = VT S0 - p0
Maximum Profit = 8. Roll yield = Spot price of a commodity
Maximum Loss = S0 + p0 X Futures contract price or
Breakeven =ST* = S0 + p0 Roll yield = Futures contract price with
expiration date X Futures contract price
Reading 61: Introduction to Alternative with expiration date Y.
Investments
9. Returns on a passive investment in
1. Total Return = Alpha R + Beta R commodity futures
= Return on the collateral + RP or
2. Asset Based Valuation = Co value = Cos convenience yield net of storage costs.
assets value Cos liabilities value
10. Sharpe ratio = (Investment return Rf
Real Estate Valuation return) / S.D. of return
3. Direct Cap Approach Valuation of a
1Ug 11. Sortino Ratio = (Annualized RoR
property = where
QHRMGHwMHGMOL NHGI 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