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CFA Level 1 Formulas Exam Questions with Correct Answers

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CFA Level 1 Formulas Exam Questions with Correct Answers 95% confidence interval - Answer-+/- 1.96 SDs 99% confidence interval - Answer-+/- 2.58 SDs Z score - Answer-(x-mean)/SD Roy's safety first ratio - Answer-(E(Rp) - Rtarget)/SD Mean sampling error - Answer-mean - miu Standard...

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  • March 1, 2024
  • 13
  • 2023/2024
  • Exam (elaborations)
  • Questions & answers
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CFA Level 1 Formulas Exam Questions
with Correct Answers
Price change based on convexity - Answer--duration(change in yield)+1/2(convexity)
(change in yield)^2

Effective Duration - Answer-Required if a bond has embedded options:
[(v-)-(v+)]/[2V0(change in curve)]

Modified Duration - Answer-[(v-)-(v+)]/[2V0(change in yield)]

Future Value - Answer-PV(1+(I/Y)^N)

PV - Answer-FV/(1+r)^n

PV of perpetuity - Answer-PMT / discount rate

Approximate percentage price change of a bond - Answer-(-)(modified duration)(ΔYTM)

Nominal Risk Free - Answer-Real Risk Free + expected inflation

Required Return - Answer-Nominal risk free + liquidity premiums + default risk premium
+ maturity risk premium

EAR - Answer-[(1+periodic rate)^N ] - 1

EAR continuous - Answer-e^r - 1

Bank discount yield - Answer-(FV - Price)/(FV) * (360/T)

HPY - Answer-[(P1+D1)/P0] - 1

EAY - Answer-(1+HPY)^(365/T) - 1

HPY (MMY equation) - Answer-MMY * (T/360)

MMY - Answer-HPY * (360/T)

Geometric return - Answer-[(1+r1)(1+r2)(1+r3)]^(1/n) - 1

Time weighted return - Answer-[(1+HPY1)(1+HPY2)(1+HPY3)]^(1/n) - 1

Harmonic Mean - Answer-[N/(sum of (1/sample means))]

, Position of observation - Answer-(n+1)*(k/100)

Excess kurtosis - Answer-Sample kurtosis - 3 (3 is normal kurtosis)

Mean absolute deviation - Answer-sum of: (mean - sample mean)/n-1

Variance - Answer-(x-mean)^2/N (population) and divided by (n-1) for a sample

Coefficient of Variation - Answer-Sample standard deviation/sample mean

Sharpe Ratio - Answer-Risk of portfolio - risk free / Standard deviation of portfolio

Joint Probability - Answer-P(AB) = P(A|B) * P(B)

Addition rule - Answer-P(A or B) = P(A) + P(B) - P(AB)

Multiplication rule - Answer-P(A and B) = P(A)*P(B)

Total Probability Rule - Answer-P(A) = P(A|B1)*P(B1)...+P(A|B2)*P(B2)

Expected Value - Answer-P(x)*(x)

Covariance - Answer-P[(Ra - E(Ra) * (Rb - E(Rb)] - sum for all probabilities that sum to
1 OR [SDa*SDb*correlation)

Correlation - Answer-Covariance(A,B) / SDa*SDb

Portfolio expected return - Answer-weight times the E(R) of each stock

Portfolio variance - Answer-Wa^2*SDa^2 + Wb^2*SDb^2 + 2WaWb*SDa*SDb*Corr(a,b)

Baye's formula - Answer-P(new info) / unconditional probability of new info*prior prob of
event

Combination binomial - Answer-nCr - order doesn't matter

Permutation binomial - Answer-nPr - order matters

Binomial probability - Answer-nCx * p^x * (1-p)^(n-x)

Binomial Expected value - Answer-nP

Binomial variance - Answer-np(1-p)

90% confidence interval - Answer-+/- 1.645 SDs

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