Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

CFA Lvl 1 > Formulas > Flashcards

Formulas Flashcards

(78 cards)

Start Studying
1
Q

Nominal interest rate=

A

Nominal interest rate= real risk-free rate + expected inflation rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Required interest rate on security=

A

Required interest rate on security= nominal risk-free rate + default risk premium+ liquidity
premium + maturity risk premium

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Effective Annual Return (EAR)=

A

Effective Annual Return (EAR)= EAR=(1+periodic rate)m -1

Periodic rate= stated annual rate/m
M= number of compounding periods per year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

PV perpetuity =

A

PV perpetuity = PMT / (I/Y)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

NPV =

A

NPV = ∑( CF / (1+r)^t)

CF= Expected cash flow
r =Discount rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Holding period return (HPR) =

A

Holding period return (HPR) = (Ending Value - Beginning Value) / (Beginning Value)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Effective Annual Yield (EAY)=

A

Effective Annual Yield (EAY)= (1+HPY)^(365/t) -1

HPY= Holding period yield

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Geometric Mean=

A

Geometric Mean= [(1+R1)(1+R2)…. (1+Rn)]^(1/n)-1
Geometric mean return is also known as compound annual rate of return

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Harmonic Mean=

A

Harmonic Mean= N / ∑(1/x)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Position of observation at a given percentile

A

Ly=(n+1) (y / 100)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Mean Absolute Deviation (MAD)=

A

(∑Xi - X) / n

X = Arithmetic mean

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Population Variance

A

σ^2 = (∑(Xi-μ)^2) / N

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Standard Deviation

A

σ = square root of variance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Sample Variance

A

σ^2 = (∑(Xi-μ)^2) / (N - 1)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Chebyshev’s Inequality

A

Percentage of observations that lie within k standard deviations of the mean is at least= 1-1/k^2

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Coefficient of Variation

A

CV = (standard deviation of x) / (average value of x)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Sharpe Ratio=

A

(Rp-RFR) / σp

Rp= Portfolio Return
RFR= Risk Free Rate
σp= standard deviation of portfolio return

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Sample Skewness (Sk) =

A

(∑(Xi-x)^3) / (s^3)

s =sample standard deviation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Excess Kurtosis=

A

Excess Kurtosis= Sample Kurtosis - 3

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Multiplication Rule Of Probability

A

P(AB)=P(A/B)*P(B)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Addition Rule Of Probability

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Total Probability Rule (Used to determine unconditional probability of an event)

A

P(A)=P(A/B1)P(B1)+P(A/B2)P(B2)+………+P(A/BN)P(BN)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Expected value of random variable=

A

weighted average of possible outcomes

Weights = probabilities that the outcome will occur

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Bayes Formula

A

Updated Probability=( Probability of new information for a given event / unconditional
probability of new event )*(prior probability of event)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
P/E =
P/E = (Dividend payout ratio) / (k - g) dividend payout = 1 - retention rate
26
Weighted Average Cost of Capital =
WACC= (wd)[kd(1-t)]+(wps)(kps)+(wcc)(Kcc) Wd= percentage of debt in capital structure. Wps=percentage of preferred stock in the capital structure. Wcc=percentage of common stock in the capital structure
27
Factorial
n! = n*(n-1)*(n-2)*(n-3)…… *1 0!=1
28
To standardize a normal variable
z=(Observation - Population Mean) / (Standard Deviation)
29
Roy’s safety first criteria
SFR= ([E(Rp)-Rl]) / (σ p) **Choose the portfolio with largest SFR
30
Continuously compounded rate of return
Rcc=ln(1+HPR)
31
Standard Error of sample Mean
σx= σ / √n σ= Standard deviation of population n=Size of the sample
32
Price Elasticity of Demand =
%∆Quantity Demanded / %∆Price
33
Cross Price Elasticity =
%∆Quantity Demanded / %∆Price of Related Goods
34
Income Elasticity =
%∆Quantity Demanded / %∆ in Income
35
Accounting profit=
Accounting profit=total revenue-total accounting costs
36
Economic profit=
Economic profit=accounting profit-implicit opportunity costs Or Economic profit=total revenue-total economic costs
37
Normal profit
Normal profit is the accounting profit that makes economic profit equal to zero
38
Marginal Cost
MC=change in total cost / change in output
39
Nominal GDP =
∑Pi, tQi, t Pi,t= Price of good i in year t. Qi,t=Quantity of good I produced in year t
40
GDP deflator=
GDP deflator= (nominal GDP / value of year t output at year t)*100
41
Per Capita Real GDP=
Per Capita Real GDP = GDP / population
42
GDP by expenditure approach
GDP = C + I + G + (X - M) C = Consumption spending I = Investments G = Government purchases X = Exports M = Imports
43
GDP by Income Approach
GDP=national income+ capital consumption allowance+ statistical discrepancy
44
National Income=
National Income= compensation of employees (wages and benefits) + corporate and government enterprise profits before taxes +Interest Income +Unincorporated business net income (business owner’s income) +rent +indirect business taxes-subsidies
45
Personal Income=
Personal Income= national Income +transfer payments to households -indirect business taxes -corporate income taxes -undistributed corporate profits
46
Personal disposable income=
Personal disposable income = personal income - personal taxes
47
CPI=
CPI= (Cost of basket at current prices / cost of basket at base period prices)*100
48
Real Exchange Rate=
Real Exchange Rate= Nominal Exchange Rate(d/f) * ((CPI foreign) / (CPI domestic))
49
Interest Rate Parity
foward / spot = (1+interest rate (domestic)) / (1+interest rate (foreign))
50
Income statement equation
Net income = revenues - expenses
51
Straight line depreciation expense=
(cost - residual value) / (useful life)
52
Basic EPS=
(net income - preferred dividends) / (weighted average number of common shares outstanding)
53
Diluted EPS=
(Adjusted income for common shareholders) / (weighted average common and potential common shares outstanding)
54
Current Ratios=
(Current Assets) / (Current Liabilities)
55
Quick Ratio=
(current assets – inventories) / current liabilities
56
Cash Ratio=
(Cash + Marketable Securities) / (Current Liabilities)
57
P/E =
dividend payout ratio / k - g
58
Debt to equity ratio=
(Total debt) / (Total Shareholders Equity)
59
Debt To Capital=
(Total debt) / (Total Debt + Total Shareholders Equity)
60
Financial Leverage=
(Average Total Assets) / (Average Total Equity)
61
Interest Coverage Ratio=
(Earnings Before Interest and taxes) / (Interest payments)
62
Net profit margin=
(Net Income) / Revenue Net income= earnings after taxes but before dividends
63
Gross Profit Margin=
(Gross profit) / Revenue Gross profit= Net Sales- COGS
64
Operating profit margin=
(Operating Income (EBIT)) Revenue
65
Return on assets (ROA)=
(Net Income) / (Average Total Assets)
66
Return on Total Capital=
EBIT / (Average Total Capital)
67
Return On Equity=
(Net Income) / (Average Total Equity) or (Net Income / Revenue) * (Revenue / Equity)
68
Sustainable growth rate=
RR * ROE RR= Retention rate =1-dividend payout
69
Coefficient of variation sales=
(Standard deviation of operating income) / (Mean sales)
70
CV Operating Income=
(Standard deviation of operating income) / (mean operating income)
71
CV Net Income=
(Standard deviation of net income) / (Mean net income)
72
COGS=
beginning inventory + purchases - ending inventory
73
Depreciation methods
i) straight line and ii) ddb covered earlier. ii) units of production depreciation= (Original cost-salvage value) / (life in output units) * Output units in the period
74
Effective tax rate=
(Income tax expense) / (Pretax income)
75
WACC=
(wd) (kd) (1 - t) + (wps) (kps) + (wcc) (Kcc) Wd= percentage of debt in capital structure. Wps=percentage of preferred stock in the capital structure. Wcc=percentage of common stock in the capital structure t = marginal tax rate Kd = before tax cost of debt Kcc = cost of common stock Kps = cost of preferred stock
76
After tax cost of debt=
kd (1 - t)
77
Dividend discount model
D1 / (k-g) D1= Next year dividend. k = Required rate of return on common equity. g = Firm’s expected constant growth rate.
78
Required Return (RR) =
Rf + (RMarket – Rf) × Beta RR = required return Rf = risk-free rate RMarket = market rate of return

CFA Lvl 1 (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions