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!
P(B|A) = P(B) or if P(A|B) =
1 L/
== 1
2& o & , o + L/ !!R
P(A) L/
(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

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


L '
m% m
S.D estimate of s = 1. Test Statistic =
estimator of common variance =
= L% /& F% ' L /& F
m
% /
where = & + k
k k = L% ' L /k
L/& *
when Pop S.D is unknown, the standard 2.
4. Finite Population Correction Factor = fpc error of sample statistic is give by =

F 7. Test Statistic for a test of diff b/wn two
1/L L
= where N= population pop means (normally distributed, unequal
1/&
*
and unknown pop var unknown)
when Pop S.D is unknown, the standard
5. New Adjusted Estimate of Standard Error error of sample statistic is give by = % / / % /
= (Old estimated standard error fpc) t= %/
In this df calculated as

% '
L
m% m

6. Construction of Confidence Interval (CI) =

% '
2. Power of Test = 1-Prob of Type II Error m% m
Point estimate (Reliability factor =

Standard error) %
m% m

/h
3. = (when sample size is large or m%
'
m
m
CI for normally distributed population

small but pop S.D is known)
with known variance = H/k 8. Test Statistic for a test of mean differences
L
/h
(normally distributed populations,
CI for normally distributed population 4. = (when sample size is large but
F
- unknown population variances)
with unknown variance = H/k m
L pop S.D is unknown where s is sample
where S = sample S.D. J/h
S.D) =
FJ
sample mean difference = =
7. Students t distribution /h &
F 5. L/& = - (when sample size is large or L
M[& M
= H/k m L
L m
h J% /J
small and pop S.D is unknown and pop sample variance = Jk =
L/&
sampled is normally or approximately
x sample S.D = Jk
8. Z-ratio = Z = normally distributed)
/ n
 FinQuiz Formula Sheet CFA Level I 2016

sample error of the sample mean kk is another chi square random (where V = most recent closing price
F variable with one n degrees of and Vx = closing price x days ago)
difference = =
L
freedom Alternate Method to calculate M =
"
8. Chi Square Test Statistic (for test 100
"
12. Spearman Rank Correlation = 7
concerning the value of a normal
L/& F
6 LM[& &k
population variance) k = where =1 5. Relative Strength Index = RSI = 100
h k 1 &ff
where
1 = k = For small samples rejection points for &'NF
m R axHLTI7
= h / the test based on 7 are found using RS =
iOL axHLTI7
L/&
table.
For large sample size (e.g. n>30) t-test 6. Stochastic Oscillator (composed of two
9. Chi Square Confidence Interval for
can be used to test the hypothesis i.e. lines %K and %D):
variance
L/& F
2 &/k 7
Lower limit = L = and Upper limit =

/ 1 7k &/k Q/B&
% = 100 where:
z&/B&
L/& F
=U== C = latest closing price, L14 = lowest
%/ Reading 12: Technical Analysis
price in last 14 days, H14 is highest
10. F-test (test concerning differences between 1. Relative Strength Analysis = price in last 14 days
variances of two normally distributed %D = Average of the last three %K
F%
values calculated daily.
populations) F =
F
2. Price Target for the 7. Put/Call Ratio (Type of Sentiment
&k = 1 & &k = Head and Shoulders = Neckline Indicators) =


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

Indicators) =

' ' .'
11. Relation between Chi Square and F- 3. Simple Moving Average =

% 9. Arms Index TRIN i.e. Trading Index (Type
.
distribution = = where: of Flow of funds Indicator) =

L 4. Momentum Oscillator (or Rate of Change
&kis one chi square random variable Oscillator ROC): =
1O.OP KJ~HL g77SI7 1O.OP iIawML g77SI7
with one m degrees of freedom "OwS.I OP KJ~HL g77SI7"OwS.I OP iIawML g77SI7
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 %
3. Slope of Budget Constraint Line = =

Introduction variable cost
%
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 = %

%
Reading 15: Demand & Supply Analysis: The
Q2 Q1
Firm
3. Consumer Surplus = Value that a %Q 2 (Q1 + Q2 )
1
=
consumer places on units consumed %P P2 P1 1. Profit = Total revenue Total cost
Price paid to buy those units
2 ( P1 + P2 )
1
Area (for calculating Consumer 2. Accounting Profit = Total Revenue
Surplus) = (Base Height) = (Q0 Explicit Costs (or Accounting costs)
9. Income Elasticity of Demand =
P 0) %
= 3. Economic Profit
%
4. Producer Surplus = Total revenue received Q2 Q1 = Total Revenue Explicit Costs
from selling a given amount of a good Implicit Costs or
%Q 2 (Q1 + Q2 )
1
Total variable cost of producing that = = Accounting Profit Implicit Costs
amount %I I 2 I1
or
2 ( I1 + I 2 )
1
= Total Revenue Total Economic
Total revenue = Total quantity sold Costs
Price per unit 10. Cross Elasticity =
%
Area (for calculating Producer 4. Economic costs = Explicit costs + Implicit
%
Surplus) = (Base Height) = costs
{(Q0) (P0 intercept point on y- 5. Normal Profit = Accounting Profit
Reading 14: Demand & Supply Analysis:
axis**)} Economic Profit
Consumer Demand

**where supply curve intersects y-axis ! " 6. Accounting profit = Economic Profit +
1. Marginal Utility =
#$ Normal Profit
5. Total Surplus = Consumer surplus +
Producer surplus 2. Equation of Budget Constraint Line = (PX 7. Economic rent = (New Higher Price
QX ) + (PY QY) after in Demand Previous Price before
in Demand) QS before in Demand
 FinQuiz Formula Sheet CFA Level I 2016

8. Total Revenue (TR): 19. Break-even price: P = ATC Output 26. Least-cost optimization Rule:
level where Price = Average Revenue = &' -,
= Price Quantity or =
-,
= Sum of individual units sold Marginal Revenue = Average Total Cost &' 2$ #
where, Total Revenue = Total Cost.
Respective prices of individual Units 2 #

sold = (Pi Qi)

20. Firms earn Economic Profits when Price > 27. Profit is maximized when: MRP = Price or
9. Average Revenue (AR) =
! )* Average Total Cost cost of the input for each type of resource

that is used in the production process
21. Profits occur when Total Revenue (TR)
! )*
10. Marginal Revenue (MR) = Total Cost (TC) & when Price = Marginal 28. Marginal Revenue product = Marginal

Cost firm will continue operating. Product of an input unit Price of the
11. Total Variable Cost = Variable Cost per Product = Price of the input =
22. Losses are incurred when there are ! )*
unit Quantity Produced

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

Variable Cost) AND when losses fixed
costs firm will shut down. 2. Marginal Revenue = Price 1
15. Marginal Variable Cost =
&
! +, #$
! 7$
24. Average Product =
-, 3. Concentration Ratio =
$$ *$ 2 '$ &f $
16. Marginal revenue (in perfect competition) ! &1 $
!
= Avg. Revenue = Price = Demand 25. Marginal Product = =
-,
! . 4. Herfindahl-Hirshman Index = Sum of the
17. Profit can be increased by increasing / 01$
squares of the market shares of the top N
output when MR> MC companies in an industry

18. Profit can be increased by decreasing

output when MR< MC
 FinQuiz Formula Sheet CFA Level I 2016

Reading 17: Aggregate Output, Prices & unincorporated business net income + rent 18. GDP = Household consumption + Private
Economic Growth + indirect business taxes less subsidies Sector Saving + Net Taxes

1. Nominal GDP t = Prices in year t 10. Total Amount Earned by Capital = Profit + 19. Domestic saving = Investment + Fiscal
Quantity produced in year t Capital Consumption Allowance balance + Trade balance

2. Real GDP t = Prices in the base year 11. PI = National income Indirect business 20. Trade Balance = Exports Imports
Quantity produced in year t taxes Corp income taxes Undistributed
Corp profits + Transfer payments 21. Fiscal balance = Government Expenditure
3. Implicit price deflator for GDP or GDP Taxes = (Savings Investment) Trade
deflator = 12. Personal disposable income (PDI) = Balance
* $ Personal income Personal taxes OR GDP 22. Average propensity to consume (APC) =

* ,$ $ 8''' #$
(Y) + Transfer payments (F) (R/E +
100 )
Depreciation) direct and indirect taxes
(R)
4. Real GDP = [(Nominal GDP / GDP 23. Quantity theory of money equation:
deflator) 100] Nominal Money Supply Velocity of
13. Business Saving = R/E + Depreciation
Money = Price Level Real Income or
5. GDP deflator =
/
100 Expenditure
) 14. Household saving = PDI - Consumption
expenditures - Interest paid by consumers
24. % in unit labor cost = % in nominal
6. GDP = Consumer spending on final good to business - Personal transfer payments to
wages - % in productivity
& services + Gross private domestic invst foreigners
+ Govt. spending on final goods & services
25. Economic growth = Annual % in real
+ Govt. gross fixed invst + Exp Imp + 15. Business sector saving = Undistributed
GDP
Statistical discrepancy corporate profits + Capital consumption
allowance
26. Total Factor Productivity growth = Growth
7. Net Taxes = Taxes Transfer payments
in potential GDP [Relative share of labor
8. GDP = National income + Capital 16. Total Expenditure = Household
in National Income (Growth in labor) +
consumption allowance + Statistical consumption (C) + Investments (I) +
[Relative share of capital in National
discrepancy Government spending (G) + Net exports
Income (Growth in capital)]
(X-M)
9. National Income = Compensation of
27. Growth in potential GDP = Growth in
employees + Corp & Govt enterprise 17. Private Sector Saving = Household Saving
technology + (Relative share of labor in
profits before taxes + Interest income + + Undistributed Corporate Profits +
National Income Growth in Labor) +
Capital Consumption Allowance
 FinQuiz Formula Sheet CFA Level I 2016

(Relative share of capital in National 3. Narrow money = M1= currency held MPS = 1 MPC.
Income Growth in capital] outside banks + checking accounts + Total increase in income and spending
travellers check = Fiscal multiplier G
28. Capital share =Corporate profits + net
interest income + net rental income + 4. Broad money = M2 = M1 + time deposits 10. Fiscal Multiplier (in the presence of taxes)
(depreciation/ GDP) + saving deposits
MPC (with taxes) = MPC (1 - t)
7 #$ 5. M3 = M2 + deposits with non-bank &
29. Labor share = Fiscal multiplier =
&/)$Q &/G
financial institution
Total in income and spending =
Reading 18: Understanding Business Cycles Fiscal multiplier G
6. Quantity Theory of Money = M V = P
Y where, Initial in consumption due to
1. Price index at time t2 = reduction in taxes = MPC tax cut
"HwSI OP GxI QO.7S.RGMOL yH7{IG HG G M = Quantity of money
100 V = Velocity of circulation of money amount
"HwSI OP GxI QOL7S.RGMOL yH7{IG HG G %
9 k P = Average price level Total or cumulative effect of tax cut =
Inflation Rate = 1
&ff multiplier initial change in
Y = Real output
consumption
2. Fisher Index = (where, IL =
7. Neutral Rate = Trend Growth + Inflation
Laspeyres index and Ip = Paasche Index) Target 11. Cumulative multiplier =
* * 2 < $
% OP Di$
3. () = 8. Impact of Taxes and Government
! , $ 2 <1
Spending: The Fiscal Multiplier
. 2 <1 Reading 20: International Trade & Capital
The net impact of the government sector
Flows
/ on AD:
4. Velocity of money =
& G T + B = Budget surplus or Budget 9$
1. Terms of trade =
deficit $
Reading 19: Monetary & Fiscal Policy where, G = government spending , T
=taxes, B =transfer benefits 2. Terms of Trade (as an index number) =
1. Total Money created = New deposit/ Disposable income = Income Net 8*' 9$
8*' $
Reserve Req taxes = (1 t) Income
where, Net taxes = taxes transfer
2. Money Multiplier = 3. Net exports = Value of a country's (exports
payments, t = net tax rate
& imports)
)$* )C $*
9. Fiscal Multiplier (in the absence of taxes)
= 1/(1 - MPC)
 FinQuiz Formula Sheet CFA Level I 2016

4. Net welfare effect = consumers surplus 4. Change in Real Exchange rate = 11. Return on hedged foreign investment
U
loss + producers surplus gain + Govt. S/R &' R
UR
(with a quoted forward rate) = P/J 1 +
revenue 1 + U 1 &
S/R &' S
US P
!/

5. Closed Economys output = Y = C+I+G &

5. Direct Quote = 12. Expected % change in the spot rate =

6. Open Economys output = Y = FZ^% M /M
6. Points on a forward rate quote = Fwd X- 1 = %G'& =
FZ &'M
C+I+G+(X-M) rate quote Spot X-rate quote
Current Account Balance = X-M = Y-
V< $ Forward points: P/J P/J =
C+I+G 7. Forward rate = Spot X-rate +
&f,fff M /M
P/J (where is quoted
&'M X
7. Consumption = Income + transfers taxes interest rate period)
8. Forward premium/discount (in %) =
saving $ /'(< $/&f,fff)
1
$ / 13. Relationship between the trade balance and
d
C = Y - Sp =Y+R-T-Sp And, expenditure/ saving decisions:
CA = Sp- I+ Govt surplus (or Govt saving) 9. To convert spot rate into a forward quote = Ex Im = (Sav Inv) + (T G)
= Sp- I+ (T- G- R)Sp + Sg = I + CA (when points are represented as %) = Spot
exchange rate (1 + % premium or where T= taxes net of transfers
where, Sg = Govt savings discount) G= government expenditures)
Sp = I + CA Sg
Current Account Imbalance CA = Sp 10. Arbitrage relationship is stated as follows: 14. Price elasticity of demand = =
+ Sg I % 2' C %
1 + J = 1 + P
& =
% 2' %

!
Reading 21: Currency Exchange Rates
In case of indirect quote, Arbitrage 15. Expenditure (R) = Price Quantity = P
1. Foreign price level in domestic currency = relationship is: 1 + J = Q
S/ P 1/P/J 1 + P P/J % in expenditure = % R = % P
&'M + % Q = (1- ) % P
=

&'M
2. Real exchange rate(/) = (S P )/P =
Forward rate as a % of spot rate = 16. Basic idea of Marshall-Lerner condition =
S (P /P ) !/ &'M
= + ) ) 1 > 0 where,
F/ &'M
3. Real Exchange Rate $/' =
#R
x=share of exports
S/ X=price elasticity of foreign demand for
#S
domestic country exports
 FinQuiz Formula Sheet CFA Level I 2016

M=share of imports Reading 25: Understanding Income Statements / / *$

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

3. Amortized cost of PPE = Historical cost #$2'&1, $$ 6. End Inventory = Beg inventory +
12. Cash ratio =
# -,$
Accumulated depreciation Impairment Purchases COGS
losses
13. Long-term debt-to-equity =
! '/ , 7. End a/c payable = Beg a/c payable +
4. Carrying value for PPE under revaluation ! 7C Purchases Cash paid to suppliers
model
= Fair value at date of revaluation ! , 8. Cash paid to employees = Salary and
14. Debt-to-Equity =
! 7C
Accumulated depreciation (if any) wages expense Increase in salary and
! ,
wages payable
5. Amortized cost of PPE = Historical cost 15. Total Debt =
! 8$$$
Accumulated depreciation Impairment 9. End salary and wages payable = Beg salary
losses ! 8$$$ and wages payable + Salary and wages
16. Financial Leverage =
! 7C
expense cash paid to employees
6. Carrying value for PPE under revaluation
Reading 27: Understanding Cash Flow
model 10. Cash paid for other operating expenses =
Statements
= Fair value at date of revaluation Other operating expenses Decrease in
Accumulated depreciation (if any) prepaid expenses Increase in other
1. End Cash = Beg cash + Cash receipts
accrued liabilities
(from operating, investing, and financing
7. Deferred tax liability = Taxable income <
activities) Cash payments (for operating,
Reported Financial Statement Income 11. Cash paid for interest = Interest expense +
investing, and financing activities)
before taxes Decrease in interest payable

2. End A/c Receivable = Beg A/c Receivable

8. Deferred tax liability = Actual income tax 12. End Interest Payable = Beg interest
+ Revenues Cash collected from
payable in a period < Income tax expense payable + Interest expense Cash paid for
customers
interest
9. Vertical common-size balance-sheet =
^ $2 8 3. Cash received from customers = Revenue
13. Cash paid for income taxes = Income tax
! 8$$$ Increase in a/c receivable
expense Increase in income tax payable
# 8$$$
10. Current ratio = 4. Purchases from suppliers = COGS +
# -,$ 14. Historical cost of equipment sold = Beg
Increase in inventory
balance equipment + Equipment purchased
11. Quick (acid test) = End balance equipment
#$2'&1, $$')*,$ 5. Cash paid to suppliers = Cogs + Increase
# -,$ in inventory Increase in a/c payable
 FinQuiz Formula Sheet CFA Level I 2016

15. Accumulated Dep on equipment sold = 27. Interest Coverage = 6. Vertical common size income statement =
Beg balance accumulated dep + Dep #V.'$ '!9$ $
$ )*
expense End balance accumulated dep #V.
28. Reinvestment =
#$2 '/ $$$
7. Horizontal common size balance sheet =
16. Cash received from sale of equipment = ^ $2 k
Historical cost of equipment sold 29. Debt payment = ^ $2 &
Accumulated dep on equipment sold + #V.
#$2 -! , 8. Inventory turnover =
gain on sale of equipment
#$ $$ $ '$ $
#V. 8*' *
17. Dividends paid = Beg balance of R.E + 30. Dividend payment =
*$
Net income End balance of R.E
9. Days of Inventory on Hand (DOH) =
31. Investing and Financing = / $
18. FCFF = Net income + Non-cash charges + #V. * !*
Interest expense (1 tax rate) Cap exp #$2 <$ *$' ' *$ )*
10. Receivables Turnover =
8*' )*,$
WC expenditures
19. FCFF = CFO + Interest expense (1 Tax Reading 28: Financial Analysis Techniques
11. Days of Sales Outstanding (DSO)
rate) Cap exp / $
1. Compound Growth Rate = =
)*,$ *
%
20. FCFE = CFO Cap exp + Net borrowing 7 + `a aR bcdeaSf
1
^' + 12. Avg A/c Receivable Balance = Avg Days
#V. Credit Sales DSO or
21. CF to revenue =
/ )* -$$$ 79$$ $
2. Combined ratio = Avg A/c Receivable Balance = =
/ 7 !*
#V. $
22. Cash ROA = ghi
8*' ! 8$$$ .' jkl
3. Operating ROA =
8*' ! 8$$$
#V.
23. Cash ROE = 2$
8*' $22$_ C /
13. Payables turnover =
8*' ,$
4. ROA = or
8*' ! 8$$$
#V. ROA =
24. Cash to income = 14. No of Days of Payables =
/ $
.' / '$ 79$ &/!9 ,$ !*
8*' ! 8$$$
25. Cash flow per share = )*
#V./ *$ !9
15. WC Turnover =
8*' 0#
5. Effective Tax Rate =
/ $2$ /$ 7'$ , !9
)*
#V.
16. Fixed Asset Turnover =
8*' / V9 8$$$
26. Debt Coverage =
! ,
 FinQuiz Formula Sheet CFA Level I 2016

)* 26. Liquid Asset Requirement = 37. Discretionary CF to Debt =

17. Total Asset Turnover =
8*' ! 8$$$ ) &1, $ #V./# 9/*$
$ -,$ ! ,
18. Pretax margin =
7'$ , 9 , $ 27. Net Interest Margin = 38. Net CF to Capital expenditures =
)* / $ VV./*$
! $ 7' 8$$$ # 9
19. Return on Total Capital =
7^! ! ,
28. Sales per Square Meter = 39. Debt to EBITDA =
2 ' , C 7^!8
)*
! ) C &$
/ 40. Total Debt to total debt plus Equity =
20. ROE =
8*' ! 7C ! ,
) )*
ROE = ROA Leverage 29. Average Daily Rate = ! ,'7C
/ )$ $
ROE = Tax Burden Interest Burden
#8/#- ).7
EBIT Margin Total Asset 41. Z-Score = 1.2 + 1.4 +
/ )$ !8 !8
Turnover Leverage 30. Occupancy Rate = 7^! &+ $1
/ )$ *, 3.3 + 0.6 + 1.0
!8 ^+ ,$
$
21. Return on Common Equity = 7^!
/ / *$
31. EBIT Interest Coverage = !8
$$ $
8*' # 7C
' (-$$)
7^!8 42. Segment margin =
32. EBITDA Interest Coverage = ' )*
22. Coefficient of Variation of Operating $$ $
. .'
Income = ' )*
8*' .' 33. FFO Interest Coverage = 43. Segment turnover =
' 8$$$
VV.'$ /.' -$ 8m$$
$$ $
23. Coefficient of Variation of Net Income = ' (-$$)
. /
44. Segment ROA =
' 8$$$
7^!
8*' / 34. Return on Capital = =
8*' #
7^! ' -,$
45. Segment Debt Ratio =
24. Coefficient of Variation of Revenues = 8*' (7C'/ 9$',) ' 8$$$
. )*
8*' )* VV. Reading 29: Inventories
35. FFO to Debt =
! ,
25. Monetary Reserve Requirement (Cash 1. NRA = Estimated Selling Price
)$*$ 2 $ # ^1 #V./# 79
Reserve Ratio) = 36. Free Operating CF to Debt = Estimated Costs of completion and
$ -,$ ! ,
disposal
 FinQuiz Formula Sheet CFA Level I 2016

2. Inventory amount net of valuation 6. Impairment Loss (US GAAP) = Assets Income Tax liability currently
allowance = Carrying amount of Inventory Fair Value Carrying Amount .If payable = Taxable income Tax
Write downs Carrying amount > Undiscounted Expected rate
Future Cash Flows in deferred tax asset / liability =
3. (NRA Normal Profit Margin) MV Diff b/w the balance of the
NRA Reading 31: Income Taxes deferred tax asset / liability for the
current period and the balance of
Reading 30: Long-Lived Assets 1. Deferred tax asset = Companys taxable the previous period.
income > Accounting profit
1. Dep Exp under Straight-line Method = 9. The companys tax expense (or credit)
, #$ 2. Tax base of revenue received in advance =
= reported on its income statement = Taxes
7$ "$ -
n$ #$/7$ )$ $*' + Carrying amount Any amount of revenue payable + ( Deferred tax liability -
7$ "$ - that will not be taxed at a future date Deferred tax asset)
3. Reported Effective Tax Rate = Where,
2. Dep Exp under Units-of-Production !9 9$
Income Tax liability currently
9 8'
Method = Depreciable Cost payable = Taxable income Tax
2
7$ * # 4. Deferred tax liability = Carrying amount rate
of asset > Tax base of asset Deferred tax liability = (carrying
3. Carrying amount under cost model = amount tax base) tax rate
Historical Cost Accumulated Dep or 5. Deferred tax asset = Carrying amount of Deferred tax asset = (tax base
Amortization asset < Tax base of asset carrying amount) tax rate

4. Carrying amount under revaluation model
= Fair value at the date of revaluation
Any subsequent Accumulated Dep or
Amortization
5. Impairment Loss (IFRS) = Recoverable
Amount Net Carrying Amount
Where, Recoverable amount = Max [(Fair
value Costs to sell); Value in Use)] and
Value in use = PV of Expected Future CFs
6. Deferred tax asset = Carrying amount of
liability > Tax base of asset
7. Deferred tax liability = Carrying amount of
liability < Tax base of asset
8. Companys tax expense (or credit)
reported on its income statement = Income
tax liability currently payable + in
deferred tax asset / liability
Where,
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
2. Sale proceeds of bond = Sum of PV of
Interest Payments + PV of Face value of
Bond
 FinQuiz Formula Sheet CFA Level I 2016

3. When Face value - Sale proceed is > zero,
discount
4. When Face value Sale proceed is < zero,
premium
5. Bond payable = Face value (+) Discount
(Premium)
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
21. Interest Revenue = Lease receivable at the
beg of the period Interest rate
22. Net interest expense = Beg Net pension
liability Discount rate
23. Net Interest income = Beg Net Pension
asset Discount rate

6. Total Interest Expense (in case of discount) 14. Bond Discount/Premium Amortization 24. Reported pension expense = Pension costs
= Periodic interest payments + under Straight-line Method = Expected return on Pension plan assets
Amortization of Discount ^ $ 25. Funded Status = PV of the Defined benefit
/ $ $
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 i-exp. under effective i-rate method the asset and PV of the min lease payments
) #V/# 9
= Carrying value of the bonds at the beg. 4.
! ,
of the period Effective i-rate 20. Cost of sales = Carrying amount of the
leased asset PV of the estimated
unguaranteed residual value
 FinQuiz Formula Sheet CFA Level I 2016

5. Inventory value adjusted to FIFO basis = 2. NPV = PV of cash inflows - IO =

15. Price to tangible BV ratio =
!', ^+
End Inventory value under LIFO + End n
AT CFs at time t
LIFO reserve balance NPV = t
IO
16. Adjusted debt-to-equity ratio = t=1 (1+ Req RoR )
) ,'+ ' $
6. COGS adjusted to a FIFO basis = COGS ) 7C
under LIFO (End LIFO reserve Beg 3. Avg Accounting RoR (AAR) =
LIFO reserve) 17. Adjusted debt-to-asset ratio = 8*' / & 9$ , $
) ,'+ ' $ 8*' ^+ *$
) 8$$' + ' $ + #V$ /+
7. Useful life of the companys overall asset 4. PI = =1+
. .
8 18. Adjusted Asset Turnover ratio =
base that has passed = $
$$ 7
) 8*' $$$'+ ' $ 5. Value of a company = Value of companys
8. Avg age of the asset base = existing invst + Net PV of all of
8 19. PV of future operating lease payments = companys future invst
8 9$ + $ $
Total Future
! # -$ $
Reading 36: Cost of Capital
9. Remaining useful life of the asset = Operating Lease Payments
/ 7 ( )
1. WACC = wdrd (1 t) + wprp + were
8 9$ 20. Interest expense = Interest PV of the
lease payments 2. Debt-to-Equity Ratio conversion into
10. Avg depreciable life of the assets at
$$ 7 weight (i.e. Debt / (Debt + Equity) =
installation = 21. Depreciation expense estimated on jcvw
8 9$
xyzew{
straight-line basis = jcvw
+ 2 $ $ &'
xyzew{
11. % of asset base that is being renewed / $ $ $
through new capital investment =
#9
3. Optimal Capital Budget is the point where
$$ 7' #9
22. Adjusted Interest Coverage ratio = MC of capital = Marginal return from
EBIT + rent exp Dep exp investing
12. Adjusted BV = Total stockholders equity payments + expense
Goodwill 4. After-tax cost of debt = Before-tax
* associated with the operating lease Marginal Cost of Debt (1 firms
13. Adjusted Price to BV ratio = obligations marginal tax rate)
1 p
8m$ ^+ Reading 35: Capital Budgeting 5. Preferred Stock Price per Share
1 * 2
=
14. Tangible B.V = Total stockholders equity 1. Incremental CF = CF with a decision - CF #$ 1

Goodwill Other intangible assets without that decision

 FinQuiz Formula Sheet CFA Level I 2016

6. Expected Return on Stock I (under CAPM) 15. Sovereign yield spread = Govt bond yield Reading 37: Measures of Leverage
= E (Ri) = RF + i [E (RM) RF] (denominated in developed countrys
currency) T.B yield on a similar maturity 1. Contribution Margin (CM) = (# of units
7. Expected Return on Stock I = E (Ri) = RF + bond in developed country sold) [(price per unit) - (variable cost per
i1 (Factor risk premium)1 + i2 (Factor unit)]
risk premium)2+..+ij (Factor risk 16. Country equity premium = Sovereign yield 2. Per unit CM = Price per unit - Variable
premium)j 8 . 7C 9
cost per unit
spread 8 . $*' , &1
% $ * 1
8. Cost of Equity = = +g 3. Operating income = CM Fixed Operating
h
Costs
17. Cost of equity = Ke= RF + [(E(RM)-RF) +
9. Expected Growth Rate of Dividends CRP] % .' 7^!
4. DOL =
g = (1 - ) ROE % "$
7
18. Breakpoint = or
g = retention rate ROE #&
8 <22 $_ $ $ DOL=
< $ 2 $ #&/ V9 .' #$
10. Companys stock returns = R = a +
bR % /
19. Cost of Capital (hen flotation costs are in 5. DFL = or
% .'
%
monetary terms = r = +g #&/ V9 . #$
11. Unlevered of Comparable Company = h /V
#&/V9 . #$/V9 V #$
, abdvc
", = jabdvc 20. When FC are in terms of % of the share % /
&' &/abdvc 6. DTL= = DOL DFL =
xabdvc % % / "$
price: Cost of Equity = r = +g #&
h /V
#&/V9 . #$/V9 V #$
12. Levered of Project =
R(O 21. If FC are not tax deductible: NPV = PV of
B, R(O = , aO.R 1 + 1 R(O Cash Inflows IO (FC in % New 7. Break-even Revenue = (Variable cost per
R(O
Equity Capital) unit Break-even Number of Units) +
Z
Fixed Operating costs + Fixed Financial
13. H77IG = r Cost
&' &/G

22. If FC are tax deductible: NPV = PV of
Cash Inflows IO [(FC in % New
i Equity Capital) (1 Marginal Tax Rate)] 8. Breakeven Number of units = QBE =
14. I}SMG` = H77IG 1 + 1 V9 .' #$$'V9 V #$$

/+, $
23. Asset = (Debt Proportion of Debt) +
(Equity Proportion of Equity) 9. Operating Breakeven = QOBE =
!MIJ URI(HGMLT QO7G
$(MaI RI( SLMG/"H(MH|wI aO7G RI( SLMG
 FinQuiz Formula Sheet CFA Level I 2016

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

2. Dividend Payout ratio = 12. Post-repurchase share price = 8*' V

7. Float Factor = =
# $2 $2 *$ # $2$ /$ (&+ $2 8*' $
<2 2 2$] 8*' V
/ *, $2$
( # $2$ /$/# $2$ ( , 2$ , # aw azw aR cf jcbafewcS
`a aR j{f
3. EPS after Dividend = EPS before Dividend
2$ /$ , * Reading 39: Working Capital Management
Where, Float =Amount of money that is in
2$ /$ *
transit b/w payments (by customers) and
1. Operating cycle = No of days of inventory
funds (usable by co)
4. Stock Price after Dividend = Stock Price + No of days of receivables
before Dividend EPS after Dividend
8. Value of stretching payment = A/c payable
2. Net operating cycle = No of days of
Co's opportunity cost for ST funds
5. Total Market Value after Dividend = inventory + No of days of receivables No
Shares outstanding after Dividend Stock of days payables
price after Dividend 9. Cost of Trade Credit = 1 +
ghi
3. Money Market Yield = $
6. Stock price after 2-for-1 stock split = V */2$ 1
&/$
2$
1 , $1 $ where n = days beyond discount period
k opf
/ $
10. Cost of Line of Credit =
7. EPS after 2-for-1 stock split = $'#
7 , $1 $ 4. Bond Equivalent Yield = - 8
k V */2$ $
11. Bankers Acceptance Cost = =
2$ / $
opu $
8. DPS after 2-for-1 stock split =
/ $ - /$
, $1 $
k
5. Discount-basis Yield = 12. Commercial Paper Cost =
9. EPS after buyback = V */2$ $'_ $ $$'^1 $$

7'$/8 9 #$ V$ V + - /$
opf
2$ .$' ^,1
/ $
13. Annualized cost = Cost 12
 FinQuiz Formula Sheet CFA Level I 2016

Reading 40: The Corporate Governance of 4. 3-Yr HPR = [(1 + R1) (1 + R2) (1 + 13. (1 + Nominal R) = (1 + Real Rf R) (1 +
Listed Companies R3)]1/3 1 Inf) (1 + RP)

5. Arithmetic mean (AM) R = M = 14. (1 + Real R) = (1 + Real Rf R) (1 + RP)

N% 'N ''N.% 'N & *
Reading 41: Portfolio Management: An = G[& MG
* *
(&'/ ))
Overview 15. (1 + Real R) =
(&')
6. Geometric R for n periods = R DM =
NZ /

1. NAV of bond mutual fund = & 16. Var of a Single Asset = k = %

*
1 + & 1 + k 1 + L L 1
(* 2 , 2 )
/ $2$
)w /)

7. IRR = ! #V !
=0 17. Sample Variance = s k = e%
!/&
[f &')) w
2. New Shares that need to be created =
8 , *$ 2 V 18. Cov of R b/w two assets = Cov (Ri,Rj) =
/8+ ! * & V
8. Annual Return (Ann R):
ij i j
Ann R = (1 + Quarterly R) 4 1
3. New NAV of the Fund = NAV or Total Ann R = (1 + Monthly R) 12 1 19. Portfolio Var = k = &k &k + kk kk +
value of a Mutual Fund + Amount to be 52 2& k Cov R& , R k = &k &k + kk kk +
Ann R = (1 + Weekly R) 1
invested in the Fund 2& k &k & k
Ann R = (1 + Daily R) 365 1
4. No of shares need to be retired = Weekly R = (1 + Daily R) 5 1
20. Portfolio S.D. = Portfolio Variance
8 , <2< 2 V
Weekly R = (1 + Annual R) 1/52 1
/8+ ! * & V
21. Cov b/w asset 1 & asset 2 = Correlation of
9. Portf R (for Two Assets) = (Wght of Asset Return b/w two assets S.D. of asset 1
Reading 42: Risk Management: An
1 R of Asset 1) + (Wght of Asset 2 R S.D. of asset 2
Introduction
of Asset 2)
22. Correlation of Return b/w two assets =
10. Gross R = R Trading exp other exp #* ) ,/< < $$$
Reading 43: Portfolio Risk & Return: Part I
directly related to the generation of returns. .. $$ & .. $$ k

1. Total Return = Capital Gain (or Loss) + 23. 1 + Expected Return =1 + E R =

11. Net R = Gross R - All managerial and
Dividend Yield 1 + r 1 + E 1 + E RP
w /w%
administrative exp
2. Capital Gain =
w%
12. After-tax nominal R = Total R - Any 24. Utility of an Invest = Expected Return -
&
3. Dividend Yield =

1 allowance for taxes on realized gains Risk Aversion Coefficient
k
h
Var of Invest
 FinQuiz Formula Sheet CFA Level I 2016

25. Expected R of Portfolio = E R = & R + 4. Single-Index Model: Ri Rf = i(Rm Rf) 16. Information Ratio =
1 & E R + ei 82
/$$ )$1
5. Factor weight associated with each factor =
26. Risk of Portfolio = k = &k k + ! )$1
! &1 )$1 17. Expected Return of Portfolio (under
(1 w& )k k + 2& 1 & &k =
1 & k k & p = (1 w1) i
Arbitrage Pricing Model) = E R = R V +
6. R = P + R . P = , + + 1 ,1
27. Capital Allocation Line (CAL) = E R =
7 )e /)R = R + w& & + wk k E R R
R +
e
18. Return on an Asset in excess of 1-Month
7. Assets Beta = T-Bill Return (under four factor model) =
28. Portfolio Risk = &k &k + kk kk + # ,< $$ 1 .. 8$$
E R = + ,&! MKT +
2& k Cov R& , R k .. &1
8. Portfolio Beta = = ,&^ SMB + ,n&- HML + ,"& UMD

29. In portfolio of many asset = [& w ; [& w = 1
Reading 45: Basics of Portfolio Planning &
E R = /
[& E R )b /)R Construction
9. Sharpe Ratio =
(//&) b
k = + Cov
/ /
1. Investors Expected Utility from Portfolio
N /N
(//&) 10. Treynor Ratio = = Up = E (Rp) 2p
= + k
/ /
k b
11. M = R $ RP . P 2. Tactical Asset Allocation (TAA) Return

30. New Asset should be included in the Portf contribution = Actual return of the
7 )c /)R 7 )b /)R
only if > <, 12. Jansens Alpha = R = R portfolio Return that would have been
c b
P + R . P earned if the asset class weights were equal
to the policy weights
Reading 44: Portfolio Risk & Return: Part II
13. Security Characteristic Line (SCL) = R
R = + R R
1. Total Risk = Systematic risk +
Reading 46: Market Organization & Structure
Nonsystematic risk = 2i 2m + 2e 14. Weight of Non-market security should be
proportional to
1. Total return to a Leveraged Stock Purchase
2. Total risk of for a well-diversified portfolio 82
= i / 2i )' 7C/.
= Systematic risk = im /$$ * = where,
.
Remaining Equity = IO Purchase
3. Multi-Factor Model: M P = 15. Total Weight of Non-market security commission + (-) Trading g(l) Margin i
#
{ % paid + Div received Sales commission
[& M ( ) = M . P + should be proportional to = #
%
{ paid OR
[k M ( )
 FinQuiz Formula Sheet CFA Level I 2016

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 =
VPRIT = VPRI0 (1 + PRI1) (1 + PRI2) (1 +
VPRI =
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 +
TRIT)
VPRI 1 VPRI 0
3. Price of stock below which a margin call
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 =
&
= / $$ 2 9
in IPO ($)
= Gross proceeds received by the issuing
Pi 0
11. Weight of security i under market-cap
firm Net proceeds received by the issuing
weighting =
firm 4. Price return of the index: PR I =
/f $2$ /$ 2
N ` / $2$ /$ 2
P Pi 0 e
5. Total cost of placement to the issuing firm wi i1 Where Si = Security i
($$ $ * , V/ i =1 Pi 0
/ $ * , V
in IPO (%) = 12. Weight of Si under Mkt Cap weighting =
/ $ * , V
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 =
% 7C VPRI 0
13. Fundamental weight on security i =
7. Max leverage ratio for position financed by 6. Total return of each security = TRi = V $p $
`(V $p $ )
min margin requirement = P1i P0i + Inci e
&
& ' C P0i *Book value, cash flow, revenues, earnings,
dividends, & number of employees.
Reading 47: Security Market Indices
N " P P + Inci %
Total Return wi $ 1i 0i '
i=1 # P0i & Reading 48: Market Efficiency
1. Value of a price return index =
 FinQuiz Formula Sheet CFA Level I 2016

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
V0 = 0 = , g<r
1. Equity securitys Total Return = rg rg
$2/2$ $2'$2/$1 * 2. Value of a share of stock today =
2$ $2 79 * & '79 $' &
11. Sustainable dividend growth rate =
(&'C )) $1)^&
g = ROE b
2. ROE in yr t =
/ ( . 22$) where b = earnings retention rate = (1 -
3. Value of a share of stock for n holding
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 ) $1 L
G
3. MV of equity = Mkt price per share f 1 + 7 L
f = +
Shares O/s 4. CFO = NI + Non-cash exp Invst in WC (1 + )G (1 + )L
M[&
L'&
! n_ C
L =
4. BV of equity per share = 5. FCFE = CFO FCInv + Net Borrowing B
2$ /$
L'& = f (1 + 7 )L 1 + B
6. Value of a share for a non-div-paying
&1 $2
5. Price-to-book ratio = stock = - V#V7 f % /7%
^+ C $2 [& &'C ) $1 w 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
Reading 50: Introduction to Industry &
D0 (1 + g ) D0 (1 + 0) D0
Company Analysis V0 = = =
rg r 0 r Reading 52: Fixed Income Securities: Defining
Elements
9. Value of a pref stock (non-callable, non-
Reading 51: Equity Valuation: Concepts & 1. Inf adj Principal amount of a zero-coupon-
convertible) with maturity at time n =
Basic Tools L indexed bond
f
f = G
+ L
= [Par value (1 + CPI)]
1. Value of a share of stock today = (1 + ) 1+
G/& 2. Inf adj coupon payment for an interest-
- 79 *
[& (&'C ).) $1)^ indexed bond
Gordon Growth Model: = [(coupon rate Par value) (1+CPI)]
 FinQuiz Formula Sheet CFA Level I 2016

3. Inf adj Principal amount of a capital- 6. Full price of bond = Flat price of bond + (I + Qm) FV (I + QM ) FV (I + QM ) FV
+ FV
indexed bond Accrued interest m + m +... + m
1 2 N
" I + DM % " I + DM % " I + DM %
= [Par value (1 + CPI)] $1+ ' $1+ ' $1+ '
G
# m & # m & # m &
7. Accrued interest = AI =
*
4. Inflation adjusted coupon payment for a
14. Price of Money Market Instrument =
capital-indexed bond
8. Full price of a fixed-rate bond between # Days &
= [Par value (1 + CPI)] coupon rate PV = FV %1 DR (
coupon payments = PVFull
$ Year '
PMT PMT PMT + FV
Reading 53: Fixed Income Markets: Issuance, = 1t/T
+ 2t/T
+... +
Trading & Funding (1+ r) (1+ r) (1+ r) Nt/T 15. Market Discount Rate =
# FV PV &

Reading 54: Introduction to Fixed Income

9. Full price of a fixed-rate bond between
coupon payments
(
DR = Year ) %
Days $ FV ('
Valuation PV (1+ r)t/T
16. Price of Money Market Instrument =
1. Amount of discount below par value = 10. Interpolated yield (say for 3-year, given FV
PV =
Present value of deficiency market discount rates for 2 and 5 yrs) = " Days %
o/k
$1+ AOR '
(Average yield for 2 year bonds) + # Yr &
2. Present value of deficiency = u/k

# /&1 $ * (average yield for 5 year bonds average

[& &'&1 $ w yield for 2 year bonds) 17. Add-on rate =
! Yr $ ! FV PV $
3. Bond price = m n AOR = # &# &
! APRm $ ! APRn $ " Days % " PV %
PMT PMT PMT + FV 11. #1+ & = #1+ &
PV = 1
+ 2
+... + " m % " n %
(1+ r) (1+ r) (1+ r) N Relation b/w two spot rates and Implied
12. Current yield = Forward Rate:
/< /.
4. % Price change = $ * * 2
.
V 18. (1 + zA)A (1 + IFRA,B-A)B-A = (1 + zB)B
5. Bond price (given sequence of spot rates)
13. Price of Floating-rate note = PV= Z-spread over the benchmark spot curve:
= PV =
Price of a bond =
PMT PMT PMT + FV
1
+ 2
+... + PV =
PMT
+
PMT
+... +
PMT + FV
(1+ Z1 ) (1+ Z 2 ) (1+ Z N ) N (1+ z1 + Z)1 (1+ z2 + Z)2 (1+ zN + Z) N
 FinQuiz Formula Sheet CFA Level I 2016

19. OAS = Z-spread Option value (bps per Net interest = (Beg mortgage Total Amount of Coupon Pmt = CR Par
year) balance Pass-through rate) / 12 value No of periods
Scheduled principal re-pmt =
20. G-spread = Yield-to-maturity on Corporate Mortgage pmt Gross i- pmt RR = Re-invstmnt rate per period
bond Yield-to-maturity on a government Gross i- pmt = (Beg mortgage CR = coupon rate
bond balance WAC) / 12
Pre-pmt for month = SMM 2. Realized RoR on Bond=
%
21. Interpolated Spread = I-spread = YTM of (Beg mortgage balance for month )*$ #$' m
the bond - Linearly interpolated yield to Scheduled principal re-pmt for ) &
1
^
the same maturity on an appropriate month)
reference curve Total principal re-pmt =
Scheduled principal re-pmt + 3. Carrying value of bond (if bond purchased
Reading 55: Introduction to Asset Backed Prepayment below par) = Purchase price + Amortized
Securities Beg mortgage balance for the amount of Discount
following month = Beg mortgage
1. Loan-to-value ratio (LTV) = balance for the month Total 4. Carrying value of a bond (if bond
8 &'' purchased above par) = Purchase price
+
Principal Pmt
Amortized amount of Premium
Projected CF for MPS = Net i-
2. Monthly CF for a MPS = Monthly CF of pmt + Total principal re-pmt
5. Amortized amount for 1st year = Bond
underlying pool of mortgages - Servicing
$ /. Price after 1-yr - Initial bond price
fee - Other fees 7. DSC ratio =
, $*
6. Capital g / (l) = Sale price of Bond after n
3. Pass-through rate = Mortgage rate on the Reading 56: Understanding Fixed Income Risk years Carrying value of Bond after n
underlying pool of mortgages Servicing & Return years
Fee - Other fees
1. Interest-on-interest gain from 7. Macaulay Duration =
4. SMM = Pre-pmt for month (Beg compounding = Future value of reinvested ( " PMT % " PMT % " PMT + FV %,
* $ ' $ ' $ Nt/T '*
mortgage balance for month Scheduled
1t/T 2t/T
* (1+ r ) ' + ( 2 t / T )$ (1+ r ) ' +... + ( N t / T )$ (1+ r ) '*-
coupons - Total amount of coupon MacDur = )(1 t / T )$
* $ PV Full ' $ PV Full ' $ PV Full '*
principal re-pmt for month) payments *+ $
#
'
&
$
#
'
&
$
#
'*
&.

Where, OR
5. CPR = 1 (1 SMM)12 FV of Reinvested Coupons = [CR(1+
RR)n-1] + [CR(1+RR) n-2] ++ [CR(1+ ' +
6. CF Construction (Monthly CF for MPS): )1+ r 1+ r + #$ N ( c r )%& )
RR)n-n] MacDur = ( , (t / T )
c #$(1+ r ) 1%& + r )
N
)* r -
 FinQuiz Formula Sheet CFA Level I 2016

& 18. Full price of Bond (in currency units) - 27. Effective Convexity =
8. Modified D =
&'
Money D in annual YTM #$( PV ) + ( PV+ ) [ 2 (PV0 )]%&
9. Annualized Modified D = 2
& (PV ) (PV+ ) (Curve) ( PV0 ))
19. PVBP =
2
28. Duration Gap = Bonds Macaulay
10. % PVFull = - AnnModDur Yield Duration Investment Horizon
20. Basis Point Value (BPV) = Money
duration 0.0001 (1 bp)
11. Approx Modified D = Reading 57: Fundamentals of Credit Analysis
(PV ) (PV+ ) 21. Bloombergs Risk Statistic = PVBP 100
2 (Yield) (PV0 ) 1. Expected Loss = Default Probability
22. %PV Full
= (-AnnModDur Yield) + Loss Severity given Default
&
12. Approx Mac Dur = Approx Mod Dur (1 ()k .'
k
+ r) 2. Operating Profit Margin =
)*

Or
(PV ) (PV+ ) %PV Full = (-AnnModDur Yield) + 3. EBITDA = Operating Income + Dep +
13. Effective D = & Amort
2 (Curve) (PV0 ) ()k
k

4. FCF = CFO Cap exp Div

1/G
14. Macaulay D for a Zero-coupon bond =
* 23. Approx. Convexity Adjustment =
5. Capital expenditures = Additions to P&E +
(PV ) + (PV+ ) [2 (PV0 )] Additions to product rights & intangibles
15. Macaulay D for a Perpetual bond = (1+ r) /
r (Yield)2 (PV0 ) Proceeds of sale of P&E
16. Avg Mod D for the Portf = 24. Convexity of a zero coupon bond =
&+ ^ & 6. Total debt = ST debt + Current portion of
Mod D of Bond 1
! &+
[ N (t / T )] [ N +1 (t / T )] LT debt + LT debt
+ Mod D of Bond 2
&+ ^ k
+ (1+ r)2
! &+
&+ ^ / 7. Capital = Debt + Equity
+ Mod D of Bond N
! &+ 25. Money Convexity vs Money Duration =
& 8. Yield on Corp Bond = Rf rate + Expected
PV Full - (MoneyDur Yield) + [
17. Money D = Annualized Mod D Full k
Inf rate + Maturity P + Liquidity P+ Credit
Bond Price MoneyCon (Yield)2]
spread
26. Money Convexity of bond = Annual
9. Yield spread = Liquidity P + Credit spread
Convexity Full Price
 FinQuiz Formula Sheet CFA Level I 2016

10. Return impact for smaller spread % 7 (!)

Short position: Price that would 3. S0 = +
&''
in price -Modified Duration Spread trigger a margin call = IM req MM
where, (theta) = PV of the costs and
req
(gamma) = PV of benefits
11. Return impact for larger spread % in
price - (Modified D Spread) + 5. TED spread = LIBOR T-Bill rate
& 4. Arbitrage and Derivatives = Underlying
Convexity (Spread)2 asset + Opposite position in derivative =
k
6. At expiration (for option Buyer):
Underlying payoff Derivative payoff =
! $ , Value of Call option =
12. Secured debt leverage = Rf return
7^!8 CT = Max (0, ST - X)
Profit from Call option = 5. Pricing and Valuation of Forward
13. Senior unsecured leverage = Max (0, ST - X) C0
,' $ , Contracts:
7^!8 Value of Put option = P0 = At Expiration F (0, T) = S0 (1 + r) T or
Max (0, X- ST) S0 = F (0, T) / (1 + r) T
! , Profit from Put option =
14. Total Leverage = Value of forward (long) during
7^!8
Max (0, X- ST) P0 contract life (where t < T) = Vt (0, T)
15. Net Leverage =
! ,/#$2 = St F (0, T) / (1 + r) (T t)
7^!8 7. At expiration (for option Seller):
Value of forward (short) during
Profit from Call option = contract life (where t < T ) = Vt
Reading 58: Derivatives Markets and Max (0, ST - X) + C0 (0, T) = F (0, T) / (1 + r) (T t) - St
Instruments Profit from Put option = Value of forward (long) at expiration
Max (0, X- ST) + P0 (where t = T) = VT (0, T) = ST - F (0,
1. Value of the contract to the Long at
T)
expiration = ST F0(T) 8. To eliminate arbitrage opportunity:
Value of forward (long) at initiation
Forward Price should be = Spot Price
2. Value of the contract to the Short at (where t = 0) = Vt (0, T) = S0 F (0,
1 + % G
T) / (1 + r) T = 0
expiration = F0(T) ST
Forward price of an asset with benefits
3. Margin % in stock market = and/or costs = (S0 + ) (1 + r) T =
Reading 59: Basics of Derivative Pricing &
&+ 1/&+ , S0 (1 + r) T ( - ) (1+ r) T
Valuation
&+ 1 Value of Forward contract with
7 (!)
benefits and/or costs during the life of
4. Margin Call: 1. Pricing of risky assets = S0 = the contract = St ( - ) (1 + r) T - F
&''
Long position: Price that would 2. Commodity = F 0, T = S0 e (r )T (T) / (1 + r) (T t)
trigger a margin call = IM req MM where, = Convenience yield Cost of
req carry
 FinQuiz Formula Sheet CFA Level I 2016

6. FRAs: An example of 3 9 FRA (read as At expiration call option = c T = Max Value FC = c0 + X / (1+r) T
three by nine): (0, ST X) Payoff at expiration (when call out-of-
Contract expires in 90 days Profit (call buyer) = Max (0, ST X) the-money) = X.
Underlying loan settled in 270 days c0 Payoff at expiration (call in-the-
Underlying rate is 180-day LIBOR Profit (call seller) = -Max (0, ST X) money) = X + (ST X) = ST.
For Synthetic FRA (take long position + c0
in a 300-day Euro$ T.D and short 13. Put-Call Parity (to avoid arbitrage) = c0 +
position in a 30-day Euro$ T.D 9. Payoff of Put options: X / (1+r) T = p0 + S0
For synthetic forward position in a 90-
day zero-coupon that begins in 30 day p T = Max (0, X- ST) Synthetic long position in a call =
(buy 120 day & sell 30 day (zero Profit (put buyer) = Max (0, X-ST) p0 X
coupon bonds) Profit (put seller) = - Max (0, X ST) + C = p 0 +S 0
(1+ r)T
p0
7. Pricing and Valuation of Swap Contract (a Synthetic long position in a put =
fixed for floating swap contract): 10. Max Profit/Loss for Option writer/holder: X
p 0 = c 0 S 0 +
Fixed Periodic rate = (1+ r)T
1 - ZN Max profit of option seller/writer Synthetic long position in an
RN =
Z1 + Z 2 +.... + Z N Option premium.
X
Where Zn are n period zero coupon Max loss of option seller/writer underlying = S0 = c 0 + p0
unlimited. (1+ r)T
bonds (i.e. $1 discount factors)
Max loss of option holder Option Synthetic long position in a riskless
1
Zn = premium X
1 + ( Ln days / 360) bond = = p 0 +S0 c0
(1+ r)T
Value of a fixed rate side (per $1 NP) Put-Call Parity
= V fixed rate = [Fixed payment (
14. Put-Call-Forward Parity = F0(T) / (1 + r) T
Z1 + Z 2 +.... + Z N )] + ($1 ZN) 11. Protective Put
+ p0 = c0 + X/(1 + r) T
Value of a floating rate side (per $ 1 Value PP = p0 + S0
15. Valuing a callable bond using Binomial
NP) = V floating rate = ($1 + 1st floating Payoff at expiration (put out-of-the-
Model:
pmt) Z1 money) = ST.
Payoff at expiration (put in-the-
Ru = Rd e2
Pricing and valuation of Options: money) = (X-ST) + ST = X.
Value at time 0 = V0 = hS0 c0
Value at time 1 will either V1+ = hS1+ -
8. Payoff of Call options: 12. Fiduciary Call
c1+ or V1- = hS1- - c1-
 FinQuiz Formula Sheet
If the portfolio was hedged, then V+
would equal V-. 2. For Call Option Seller
cT = max (0, ST X)
When ST X cT = 0
When ST > X cT = ST X
Value at expiration = -cT
Profit = cT+ c0
Maximum profit = c0
Maximum loss = no upper limit
Breakeven = ST* = X +c0
Value of the call =
3. For Put Option Buyer
pT = max (0, X - ST)
When ST < X pT = X - ST
When ST X pT = 0
Value at expiration = pT
Value of the put = Profit = pT p0
Maximum profit = X p0
Maximum loss = p0
Breakeven = ST* = X p0
Reading 60: Risk Management Applications of 4. For Put Option Seller
Option Strategies
pT = max (0, X ST)
1. For Call Option Buyer When ST < X pT = X ST
cT = max (0, ST X) When ST X pT = 0
When ST X cT = 0 Value at expiration = pT
When ST > X cT = ST X Profit = pT + p0
Value at expiration = cT
Maximum profit = p0
Profit = cT c0
Maximum loss = X - p0
Maximum profit = no upper limit Breakeven = ST* = X - p0
Maximum loss = c0
Breakeven = ST* = X + c0
CFA Level I 2016
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
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 61: 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
 FinQuiz Formula Sheet CFA Level I 2016

3. Direct Cap Approach Valuation of a 10. Sharpe ratio = (Investment return Rf

1Ug return) / S.D. of return
property = where
QHRMGHwMHGMOL NHGI
NOI = Gross potential income Estimated
11. Sortino Ratio = (Annualized RoR
vacancy losses Estimated collective
Annualized Rfe rate)/Downside Deviation
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.