Cfa Level 1 Formulas

Front 1

Full price of a bond

Back 1

Full price = Clean price + Accrued interest

Front 2

Duration

Back 2

-%change bond price/%change bond yield

Front 3

Value of Callable Bond

Back 3

=Value of option free bond - Value of the call

Front 4

TIPS coupon payment

Back 4

=Inflation adjusted Par Value X (Stated coupon rate/2)

Front 5

Absolute Yield spread

Back 5

=Yield on bond with Higher yield - Yield on bond with lower yield

Front 6

Relative Yield spread

Back 6

=(Higher yield/Lower yield)-1

Front 7

Yield Ratio

Back 7

=Higher yield/lower yield

Front 8

After-tax yield

Back 8

=Taxable yield X (1-marginal tax rate)

Front 9

Tax equivalent yield

Back 9

=Tax free yield/(1-Marginal tax rate)

Front 10

Bond equivalent yield

Back 10

=[{(1+monthly CFY)^6}-1] X 2

Front 11

Spot rate at time 3

Back 11

[(1 + one year forward rate at time 0)(1 + one year forward rate at time 1)(1 + one year forward rate at time 2)^1/3] - 1

Front 12

1 year forward rate at time 2

and

7 year forward rate at time 3

Back 12

=[(Spot rate at time 3)^3 / (Spot rate at time 2)^2] - 1

and

={[(1 + 10 year spot rate)^10 / (1 + 3 year spot rate)^3]^1/7} - 1

=

Front 13

Effective Duration

Back 13

=(Bond price when yield falls - bond price when yield rise) / 2 X initial price X % change in yield as decimal

Front 14

Percentage change in bond price

Back 14

=-effective duration X % change in yield

Front 15

Portfolio duration

Back 15

=W1D1 X W2D2 X ... X WnDn

Front 16

% change in bond price

Back 16

=Duration effect + convexity effect = [(-duration x change in yield)+ (convexity X change in yield^2)] X 100

Front 17

Price Value of basis point

Back 17

=duration X .0001 X bond value

Note: if rates increase, bond value must fall. After calculation, use this information for come up with final answer

Front 18

Value of long FRA at settlement

Back 18

=notional principal X [(floating rate-forward rate)X(days to maturity/360) / (1 + floating rate)X(days to maturity/360)

Front 19

Intrinsic value of Call and Put

Back 19

Call = max[0, S-X]

Put = max[0, X-S]

Front 20

Option value

Back 20

=intrinsic value + time value

Front 21

Lower/Upper bound European Call Option

Back 21

Lower = Max[0, S - (X/(1+RFR)^T-t]

Upper = S

Front 22

Lower/Upper bound American Call Option

Back 22

Lower = Max[0, S - (X/(1+RFR)^T-t]

Upper = S

Front 23

Lower/Upper bound European Put Option

Back 23

Lower = Max[0,(X/(1+RFR)^T-t) - S]

Upper = (X/(1+RFR)^T-t)

Front 24

Lower/Upper bound American Put Option

Back 24

Lower = Max[0,(X - S)]

Upper = X

Front 25

Put-Call Parity

Back 25

c + (X/(1+RFR)^T) = S + p

Front 26

Net fixed rate payment on fixed/floating swap

Back 26

= (SWAP fixed rate - LIBOR) X (Days to maturity/360) X (Notional Principal)

Front 27

WACC

Back 27

=Wd[(Kd)(1-t) + WpsKps + WeKe

Front 28

CAPM (Ke)

Back 28

= RFR + B[(E(rm)-RFR]

Front 29

Ke

Back 29

=CAPM or D1/P0 + g or Bond yield + Risk premium

Front 30

RFRreal

Back 30

= [(1+RFRnominal)/(1+IP)]-1

Front 31

After tax cost of debt

Back 31

=Kd(1-t)

Front 32

Cost of Preferred Stock (Kps)

Back 32

=Dps/Pnet

Front 33

Correlation

Back 33

= Cov1,2/SD1 X SD2

Indicates strength and direction in which two random variables move together.

Front 34

Total Risk

Back 34

=Systematic Risk + Unsystematic Risk

Front 35

Beta (B)

Back 35

= Cov1,mkt/SDmkt^2

Front 36

Equation for CML

Back 36

=RFR + SDportfolio[(E(Rm)-RFR)/SDmarket]

Front 37

Straight line depreciation

Back 37

=Cost-Salvage/useful life

Front 38

Double Declining Balance Depreciation

Back 38

=(2/Useful life)(Cost-Accumulated depreciation)

Front 39

Sum of Years Digits Depreciation

Back 39

Depreciation in year X = (original cost-salvage value)(n-x+1)/SYD

Front 40

Free Cash flow

Back 40

=Operating Cashflow-Net Capital Expenditures

Front 41

Common Size income statement ratios

Back 41

=Income statement account/Sales

Front 42

Common Size Balance Sheet ratios

Back 42

=Balance Sheet account/Total Assets

Front 43

Current Ratio

Back 43

=Current Assets/Current Liabilities

Front 44

Quick Ratio

Back 44

=Current assets - inventories/Current Liabilities

or
=Cash + mkt. Securities + receivables / current liabilities

Front 45

Cash ratio

Back 45

=Cash + Mkt. Securities / current liabilities

Front 46

Receivables Turnover

Back 46

=Net annual sales / Average Receivables

Front 47

Average Receivables collection period

Back 47

=365 / Receivables turnover

Front 48

Inventory Turnover

Back 48

=Cogs / Avg. Inventory

Front 49

Average inventory processing period

Back 49

=365 / Inventory turnover

Front 50

Payables turnover

Back 50

=Cogs / Avg. payables

Front 51

Payables Payment period

Back 51

=365 / Payables turnover

Front 52

Cash Conversion Cycle

Back 52

=(Avg. Rec. collection period) + (Avg. Inventory processing period) - (Payables payment period)

Front 53

Total Asset Turnover

Back 53

=Net Sales / Avg. Total Assets

Front 54

Fixed Asset Turnover

Back 54

=Net Sales / Avg. Fixed Assets

Front 55

Equity Turnover

Back 55

=Net Sales / Avg. Equity

Front 56

Gross Profit Margin

Back 56

=Gross Profit / Net Sales

Front 57

Operating Profit Margin

Back 57

=Operating Profit / Net Sales

or

EBIT / Net Sales

Front 58

Net Profit Margin

Back 58

=Net Income / Net sales

Front 59

Return on Total Capital

Back 59

=Net Income + Interest Exp. / Avg. Total Capital

Front 60

Return on Total Equity

Back 60

=Net Income / Avg. Total Equity

Front 61

Return on Common Equity

Back 61

=Net Income - Preferred Dividends / Avg. Common equity

Front 62

Business Risk

Back 62

=SD of EBIT / Mean of EBIT

or

SD of Operating Income / Mean of operating income

Front 63

Debt to Equity Ratio

Back 63

=Total long term debt / Total Equity

or

Long term liabilities + Deferred Tax + PV of lease obligations / Common + Preferred Equity

Front 64

Long Term Debt to Long Term Capital ratio

Back 64

=Total Long Term debt / Total long term capital

Front 65

Total Debt Ratio

Back 65

=Current Liabilities + Long term debt / Total Debt + Total Equity

Front 66

Interest Coverage AKA Times interest earned

Back 66

=EBIT / interest expense

Front 67

Fixed Financial Cost Ratio

Back 67

=EBIT + ELIE / gross interest expense + ELIE

Front 68

Cash flow coverage to fixed financial costs

Back 68

=CFO + Interest expense + ELIE / Interest Expense + ELIE

Front 69

Cash flow to long term debt

Back 69

=CFO / BV long term debt + PV operating leases

Front 70

Cash flow to total interest bearing debt

Back 70

=CFO / Total long term debt + current interest bearing liabilities

Front 71

Original DuPont

Back 71

=Total Asset Turnover X Equity Multiplier X Net profit Margin

or

=Sales/Total Assets X Net Income/Sales X Assets/Equity

Front 72

Extended DuPont (ROE)

Back 72

=[(EBIT/Sales)(Sales/Assets)-(Int. Exp/Assets)](assets/equity)(1-t)

Front 73

Basic EPS

Back 73

=(Net Income - Preferred Dividend) / (Weighted Avg. # common shares outstanding)

Front 74

Diluted EPS

Back 74

=(Net Income - Pref Div)+(Conv. Pref. Div.)+(Conv. Debt int.)(1-t) / (Weighted Avg. # Common)+(Conv. Pref Shares)+(Conv. debt shares)+(shares issued for Stock Options)

Front 75

Ending Inventory

Back 75

=Begenning Inventory + Purchases - COGS

Front 76

Current Cost of FIFO inventory

Back 76

=LIFO inventory + LIFO Reserve

Front 77

FIFO COGS

Back 77

=LIFO COGS - (Ending LIFO Reserve - Beg. LIFO Reserve)

Front 78

Average Age in years

Back 78

=Accumulated Depreciation / Depreciation Expense

Front 79

Average Age as % (Relative Age)

Back 79

=Accumulated Depreciation / Ending Gross Investment

Front 80

Average Depreciable Life

Back 80

=Ending Gross investment / Depreciation Expense

Front 81

Income Tax Expense

Back 81

=Taxes Payable + (Change DTL - Change DTA)

Front 82

Interest Expense

Back 82

=(Market rate @ issuance) X (Balance Sheet Value of Liability at begenning of period)

Front 83

Nominal Risk Free Rate

Back 83

=Real Risk Free Rate + Expected inflation

or

=(1+RFRreal)X(1+inflation premium)-1

Front 84

Required Rate of return on a security

Back 84

=(Real Risk Free Rate + Expected inflation) + Default risk premium + Liquidity premium + Maturity Risk Premium

or

=[(1+RFR)(1+IP)(1+RP)]-1

Front 85

EAR

Back 85

=[(1 + Periodic Rate)^n] - 1

Front 86

Continuous EAR

Back 86

=(e^r)-1

Front 87

PV of Perpetuity

Back 87

=PMT / i

Front 88

Future Value

Back 88

=PV(1+i)^n

Front 89

Bank Discount Yield

Back 89

=(Face Value-Purchase Price/Face Value) X (360/t)

Front 90

Holding Period Return (HPY)

Back 90

=(P1 - P0 + D1) / P0

Front 91

Effective Annual Yield (EAY)

Back 91

=[(1+HPY)^(365/t)]-1

Front 92

Money Market Yield

Back 92

=(360+BDY) / [360-(t X BDY)]

Front 93

Geometric Mean

Back 93

=[(1+r1)(1+r2)...(1+rn)]^(1/n)

Front 94

SemiVariance

Back 94

=Sum of (X-Avg)^2 / (#obs below Avg - 1)

Front 95

Coefficient of Variation

Back 95

=SD of X / Mean of X

Front 96

Sharpe Ratio

Back 96

=Rportfolio - RFR / SDportfolio

Front 97

Excess Kurtosis

Back 97

=Sample kurtosis - 3

Front 98

Harmonic Mean

Back 98

= N / Sum(1/x)

Front 99

Mean Absolute Deviation (MAD)

Back 99

= Sum |(X-obs)| / n

Front 100

Joint Probability P(AB)

Back 100

=P(A|B) X P(B)

Front 101

P(A or B)

Back 101

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

Front 102

nCr

Back 102

= n! / (n-r)! X r!

Front 103

nPr

Back 103

= n! / (n-r)!

Front 104

90%, 95%, 99% Confidence Intervals

Back 104

= 90% CI = -1.65
= 95% CI = -1.96
= 99% CI = -2.58 Uploding Image... <2.58><1.96
<1.65

Front 105

Z score

Back 105

=Observation-population mean / Standard Deviation

Front 106

SFRatio

Back 106

=E(rp)-RFR / SDmarket

Front 107

Continuous compounded Rate of Return

Back 107

=ln(1+HPR)

Front 108

Rate of inflation

Back 108

=CPI this year - CPI last year / CPI last year

Front 109

Potential deposit expansion multiplier

Back 109

= 1 / Required reserve ratio

Front 110

Potential increase in money supply

Back 110

= Potential deposit expansion multiplier X Increase in excess reserves

Front 111

Equation of Exchange

Back 111

= Money Supply X Velocity = GDP = PRICE X Real Output

Front 112

Price Elasticity of Demand

Back 112

= % change in Qunatity Demanded / % change in Price

Front 113

Income Elasticity

Back 113

= % change in Quantity demanded / % change in income

Front 114

Cost Minimizing condition

Back 114

= [(MP of A)/Price A] = [(MP of B)/Price B] = [(MP of C)/Price C]

Front 115

Interest rate parity

Back 115

Forward(DC/FC) = Spot(DC/FC) X [(1+Rd)/(1+Rf)]

Front 116

Annualized Forward discount or premium

Back 116

=[(forward rate/spot rate)-1] X (360/t)

Front 117

Balance of Payment equation

Back 117

=Current Account + Financial Account + Reserve Account = 0

Front 118

Relative PPP

Back 118

=Expected future exchange rate = Spot Rate X [((1+inflation domestic)^t) / ((1+inflation foreign)^t)]

Front 119

CF

Back 119

=Net income + Depreciation + Amortization

Front 120

Adjusted CFO

Back 120

=CFO + [(net cash interest outflow)X(1-t)]

Front 121

P/CF

Back 121

=Market price per share / CF per share

Front 122

P/BV

Back 122

=Market price per share / BV per share

Front 123

P/S

Back 123

=Market price per share / Sales per share

Front 124

Short interest ratio (SIR)

Back 124

=Outstanding short interest / Avg daily volume on exchange

note: ratio high (6 or above), potential demand, bullish - ratio low (4 or below), potential for short sales. bearish sign.

Front 125

Uptick/downtick

Back 125

=# block uptick transactions / # block downtick transactions

note: Bullish if ratio close to .7. Bearish if ratio close to 1.1

Front 126

Confidence Index (CI)

Back 126

=Quality bond yield / average bond yields

note: Periods of confidence yield spreads narrow, CI GETS BIGGER - Periods of pessimism yield spreads widen, CI GETS SMALLER

Front 127

Smart money technician ratios

Back 127

Confidence index

Tbill-Eurodollar spread

Specialist short sales

Debit balances in brokerage accounts

Front 128

Specialist short sales

Back 128

=Short sales by specialists / Total short sales on NYSE

note: below 30% bullish - above 50% bearish

Front 129

Mutual fund ratio

Back 129

=Mutual fund cash / total fund assets

note: greater than 13%, funds holding cash and market is bearish, CONTRARY BULLISH - Vice versa if less than 5%

Front 130

Contrarian technician ratios

Back 130

Mutual fund ratio

Investor credit balances in brokerage accounts

Investment advisor opinions

OTC vs. NYSE volume

CBOE Put/call ratio

Stock index futures

Front 131

Investment advisor ratio

Back 131

=Bullish opinions / total opinions

note: Greater than 60%, mkt bearish, CONTRARIAN BULLISH - Less than 20%, mkt bullish, CONTRARIAN BEARISH

Front 132

Volume ratio

Back 132

=OTC volume / NYSE volume

note: Greater than 112%, speculation high, CONTRARIAN BEARISH - less than 87%, investors bearish, CONTRARIAN BULLISH

Front 133

Put call ratio

Back 133

=Puts/Calls

note: Greater than .5, mkt bearish, CONTRARIAN BULLISH - less than .35, mkt bullish, CONTRARIAN BEARISH

Front 134

Expected growth rate (g)

Back 134

=Retention rate X ROE

or

(1-dividend payout) X ROE

Front 135

Preferred stock valuation

Back 135

=Price at time 0 = Dps / Kps

Front 136

One-period stock valuation

Back 136

=Price at time 0 = [(D1 / Ke) + (P1 / Ke)]

Front 137

Infinite Period Stock valuation

Back 137

=Price at time 0 = D1 / (Ke - g)

Front 138

Earnings Multiplier

Back 138

=P/E = (D1/E) / (Ke - g)

Front 139

Negative Skew

Back 139

Tail points toward negative number/origin. If median is higher than mean, distribution is negatively skewed

Front 140

Platykurtic

Back 140

Distribution with negative excess kurtosis

Distribution is less peaked than normal distribution

Front 141

Bid-Ask spread percentage

Back 141

=(Ask-Bid / Ask) X 100

Front 142

Things to consider in determining DTL treated as equity

Back 142

1. Likelihood of reversal
2. Growth rate of entity
3. Time Value of money

Front 143

Firms optimal Capital Structure

Back 143

Ratio fo debt and comm0n/preferred equity that creates lowest possible WACC and maximizes the value of the firms stock

Front 144

Financial leverage multiplier

Back 144

=A/E