Cfa Level 1 2006 - Formula Sheet
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18CFA Level 1 2006 - Formula Sheet
T
CF t
Q
M
For IRR, solve:
UANTITATIVE
ETHODS
=
=
NPV
0
t
=
t
0 (1
+
IRR
)
If IRR
k, Accept; If IRR < k, Reject.
TIME VALUE OF MONEY
where k = Cost of Capital
Interest rate = Risk free rate + Inflation risk
Money Weighted Return is an IRR calculation.
premium + Default risk premium + Liquidity risk
Holding Period Return =
premium + Maturity risk premium
−
+
t
V
V
CF
FV
= Future Value (period t) = $X x (1+r)
END
BEG
END
t
HPR =
t
PV
= Present Value (time 0) = FV
/ (1+r)
V BEG
0
t
=
∗
1/n
SAR
r
n
TWR=[(1+HPR
)(1+HPR
)..(1+HPR
)]
-1
Stated Annual Rate =
;
1
2
n
p
p
Then annualize the time-weighted return.
=
r
Periodic rate and
,
Bank Discount Yield = BDY =
p
Face Value- Market Price
360
=
n
Number of periods in a year
p
x
x
100
Face Value
T
n p
Effective Annual Rate =
=
+
−
EAR
(1
r p
)
1
Money Market Yield =
=
=
FVA
Future Value of an Annuity
T
Discount 360
MMY =
x
x
100
T
+
−
PMT x
[(1
r
)
1]
=
Price
T
r
Bond Equivalent Yield =
=
PVA
Present Value of an Annuity
0
360
1
BEY = HPY x
−
PMT x
[1
]
T
+
(1
r
)
T
=
r
STATISTICAL CONCEPTS AND
=
FVAD
Future Value of Annuity Due
T
MARKET RETURNS
T
+
−
[(1
r
)
1]
=
= +
PMT x
(1
r
)
+
P CF
1
1
Gross Return =
=
r
R
P
0
=
PVAD
Present Value of Annuity Due
T
1/T
Average gross return=(R
x R
x ... x R
)
1
2
T
1
N
1
−
[1
]
Arithmetic Mean =
Y =
Y i
T
i =1
+
(1
r
)
n
=
= +
PMT x
(1
r
)
N
r
=
Y
W Y
Weighted Mean =
, where W
are
W
i
i
i
PMT
=
i
1
Present Value of Perpetuity =
weights that sum to 1.
r
Geometric Mean =
Future Value of Uneven Cash Flows =
1
T
=
Y
(
Y xY xY x
g g g
xY
)
N
−
T t
G
FV
=
+
C
(1
r
)
1
2
3
N
t
T
=
t
0
Harmonic Mean = Inverse of arithmetic average
of inverse of observations.
Present Value of Uneven Cash Flows =
z
T
C t
th
z
percentile =
P = (N + 1)
=
PV
z
0
t
=
100
t
1 (1
+
r
)
Mean Absolute Deviation = MAD =
N
1
DISCOUNTED CASH FLOW
−
Y
Y
i
=
APPLICATIONS
i
1
N
N
1
2
T
CF t
=
−
Population Variance
(
Y
Y
)
Net Present Value =
i
=
NPV
=
i
1
t
N
=
t
0 (1
+
r
)
1
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