CFA® Program

Level I
FORMULA SHEET (2023) Version 1.0
Prepared by: Fabian Moa, CFA, FRM, CTP, FMVA, AFM

FOR REFERENCE ONLY

(Note: Formula Sheet is not provided in the CFA exam)

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Website: www.noesis.edu.sg

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CFA Level 1 (2023) Formula Sheet – Noesis Exed

CFA Level 1 – Formula Sheet (2023)

Setting Up the Texas BA II Plus Financial Calculator

Video: https://youtu.be/0MS8d8QOFmc

Using Texas BA II Plus Financial Calculator

Video: https://youtu.be/LWmTTiZz8BU

Video (Requires Login to Facebook): https://fb.watch/nci5V7Dwtj/

ed
QUANTITATIVE METHODS

Learning Module 1: The Time Value of Money

Interest Rates Ex
Interest rate, = Real risk-free rate + Inflation premium + Default risk premium
+ Liquidity premium + Maturity premium
s
Nominal risk-free rate = Real risk-free rate + Inflation premium
si

Maturity premium = Interest rate on longer-maturity, liquid Treasury debt

– Interest rate on short-term Treasury debt
oe

Single Cash Flow

Annual Compounding
= (1 + )
N

= = × (1 + )
(1 + )

where: = Future value of the investment periods from today

= Present value of the investment (i.e., principal)
= Interest rate per period

Video (FV of Single Cash Flow): https://youtu.be/DqnbyYLU1e4

Video (PV of Single Cash Flow): https://youtu.be/nVjPtUWTab4

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CFA Level 1 (2023) Formula Sheet – Noesis Exed

Non-Annual Compounding
×
= 1+

×
= 1+

where: = Stated annual interest rate (or quoted interest rate)

= Number of compounding periods per year
= Number of years

Continuous Compounding

ed
×
= ×

×
= ×

Effective Annual Rate (EAR)

Non-Annual Compounding
= 1+
Ex −1
s
Continuous Compounding
= −1
si

Video 1: https://youtu.be/ubmSCZZKWJE
oe

Video 2: https://youtu.be/a3PcCbjneU8

Annuities

Ordinary Annuity (Mode: END)

N

(1 + ) − 1
=

1
1−
(1 + )
=

Video (FV of Ordinary Annuity): https://youtu.be/ogSu7t0iWr8

Video (PV of Ordinary Annuity): https://youtu.be/VgFQOltNRK0

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CFA Level 1 (2023) Formula Sheet – Noesis Exed

Annuity Due (Mode: BGN)

(1 + ) − 1
= × (1 + )

1
1−
(1 + )
= × (1 + )

Perpetuity

If first payment starts one period from now:

ed
=

If first payment starts immediately:

Video: https://youtu.be/bBiVRtsHgUs
=
Ex
(1 + )

Learning Module 2: Organizing, Visualizing, and Describing Data

s
Frequency Distribution
si

Range of data = Maximum value – Minimum value

oe

ℎ=

= + ℎ
N

Measures of Central Tendency

1
, =

ℎ , =

where: = Observation ( = 1, 2, 3, … , )
= Weight of each observation ( = 1, 2, 3, … , )
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CFA Level 1 (2023) Formula Sheet – Noesis Exed

Geometric Mean
= … ≥0 = 1, 2, 3, … ,

Geometric Mean Return

⁄
= [(1 + )(1 + ) … (1 + )] −1

where: = Holding period returns, where = 1, 2, 3, … ,

Harmonic Mean
=
1
∑

ed
Median

Position of median =

Quantiles

Interquartile range = −
Ex
where: = First quartile
s
= Third quartile
si

Position of th percentile, = ( + 1)
oe

Measures of Dispersion

Range = Maximum value – Minimum value

N

Mean Absolute Deviation (MAD)

∑ | − |
=

Sample Variance
∑ ( − )
=
−1

Sample Standard Deviation

∑ ( − )
=
−1

5
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Relationship Between Arithmetic and Geometric Mean

= −
2

Sample Target Semideviation

∑ ( − )
=
−1

where: = target
= total number of sample observations

ed
Coefficient of Variation
=
̅

Sample Skewness

Sample excess kurtosis

≈
Ex
1 ∑ ( − )

1 ∑ ( − )
≈ −3
s
Sample covariance
si

1
= ( − )( − )
−1
oe

Sample correlation coefficient

=
N

Learning Module 3: Probability Concepts

Odds

Given a probability ( ),
( )
=
1− ( )

1− ( )
=
( )

6
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Conditional Probability
( )
( | )=
( )

Addition Rule
( )= ( )+ ( )− ( )

Multiplication Rule
( )= ( | ) ( )

If two events A and B are independent, then ( )= ( ) ( )

ed
Total Probability Rule

( )= ( )+ ( ) + ⋯+ ( )
= ( | ) ( )+ ( | ) ( )+⋯+ ( | ) ( )

Expected Value

( )=
Ex ( )
s
Variance
( ) = {[ − ( )] }
si

= ( )[ − ( )]
oe

Conditional Expected Value

( | )= ( | ) + ( | ) +⋯+ ( | )

Total Probability Rule for Expected Value

N

( ) = ( | ) ( ) + ( | ) ( ) + ⋯+ ( | ) ( )

Portfolio Expected Return

( )= ( )+ ( ) + ⋯+ ( )

Covariance
, = [ − ( )] −

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CFA Level 1 (2023) Formula Sheet – Noesis Exed

Sample Covariance
1
, = , − , −
−1
Portfolio Variance
( ) = {[ − ( )] }

= ,

( )
Requires variances and distinct covariances to estimate portfolio variance.

ed
For a two-asset ( = 2) portfolio:
( )= + +2 ( , )

where: ( , )= ( , )× ( )× ( )

Video: https://youtu.be/lUwulZ9ONC0

For a three-asset ( = 3) portfolio:

Ex
( )= + + +2 ( , )
+2 ( , )+2 ( , )
s
Covariance Given a Joint Probability Function
si

( , )= , , , × , − ( ) × , − ( )
oe

If X and Y are uncorrelated, then ( )= ( ) ( )

If X and Y are independent, then ( , ) = ( ) ( )

N

Bayes’ Formula
( | )
( | )= × ( )
( )
( | )
( | )= × ( )
( )

Video (Bayes’ Formula and Total Probability Rule): https://youtu.be/9_h0EzssPZ4

8
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Multiplication Rule for Counting

If Task 1 can be done in ways, Task 2 can be done in ways (given Task 1 is done), Task
3 can be done in ways (given Task 1 and 2 are done), and so on for tasks.

The number of ways the tasks can be done is ( × ×…× ).

!= × ( − 1) × ( − 2) × … × 2 × 1

Multinomial Formula for Labeling Problems

There are objects to be labelled with different labels, with of the first type, of the
second type, and so on, with + + ⋯ + = 1.

ed
The number of ways to perform this is:
!
! !… !

Combination Formula
Ex
The number of ways to choose objects from a total of objects (where order does not
matter).
!
= =
! ( − )!
s
Permutation Formula
si

The number of ways to choose objects from a total of objects (where order does
matter).
!
oe

=
( − )!
N

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CFA Level 1 (2023) Formula Sheet – Noesis Exed

Learning Module 4: Common Probability Distributions

Cumulative distribution function (CDF)

( )= ( ≤ )

Continuous Uniform Distribution

1
( )= ≤ ≤
−
0 ℎ

0 <
−
( )= ≤ ≤

ed
−
1 >

+
( )=
2

( )=
( − )
12
Ex
Binomial Distribution
s
~ ( , )
si

( = )= (1 − )

( )=
oe

( )= (1 − )

Normal Distribution
N

1 −( − )
( )= exp −∞< < +∞
√2 2

Standardized Normal Random Variable

−
=

10
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Safety-First Ratio
( )−
=

( < )= (− )

where: = Minimum acceptable return

Video: https://youtu.be/S3x5JrGIOUA

The Lognormal Distribution

ed
Mean of a lognormal random variable,
= exp( + 0.50 )

Variance of a lognormal random variable

where:
= exp( ), where is normal
= exp(2 + Ex ) × [exp( ) − 1]

= Mean of the normal distribution

= Variance of the normal distribution
s
Continuously Compounded Rates of Return
si

= exp ,
oe

, = ln

In general,
N

, = ln

, = , + , + ⋯+ ,

, = , + , + ⋯+ , =

, =

11
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Student’s t-Distribution

Degrees of freedom, = −1

−
=
⁄√

where: = Sample size

Chi-Square Distribution

ed
Degrees of freedom, =

where = Number of independent standard normal random variables

F-Distribution

=
( ⁄ )
( ⁄ )
Ex
is a chi-square random variable with degrees of freedom.
s
is a chi-square random variable with degrees of freedom.
si

Learning Module 5: Sampling and Estimation

Mean of sampling distribution =

oe

Variance of sampling distribution =

Standard error of the sample mean, = =

N

√ √

where: = Population mean

= Population variance
= Sample size
Absolute Error = Difference between sample mean and population mean

12
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Confidence Intervals

A 100(1 − )% confidence interval for a parameter has the following structure:

± ×

where: ℎ = ×

A 100(1 − )% confidence interval for the Population Mean, (Normally distributed with
known variance)
± ⁄

ed
√

A 100(1 − )% confidence interval for the Population Mean, (Large sample, population
variance unknown)
±

OR
±
Ex
⁄

⁄
√

√
where degrees of freedom for ⁄ = −1
s
A 100(1 − )% confidence interval for the Population Mean, (Population variance
si

unknown; Sample is small but population is approximately normally distributed)

± ⁄
√
oe

Selection of Sample Size

⁄ ×
, =
N

where = ⁄
√

13
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Learning Module 6: Hypothesis Testing

Test of a single mean ( = − 1):

−
=
⁄√

where: = Sample mean

= Hypothesized population mean
= Standard error of the mean
√

Test of the difference in means ( = + − 2):

ed
( − )−( − )
=

Test of the mean of differences ( = − 1):

=
Ex
̅−

Test of a single variance ( = − 1):

s
( − 1)
=
si

Test of the differences in variances ( = − 1; = − 1):

=
oe

Test of a correlation ( = − 2)
√ −2
=
N

√1 −
where: = Correlation

Test of independence (categorical data) = ( − 1)( − 1)

( − )
=

where: = Observed frequencies

= Expected frequencies
= Number of rows in the contingency table
= Number of columns in the contingency table

14
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Type I and II Error

Significance level (Type I error) =

Confidence level = 1 −

Type II error =

Power of the test = 1 −

Confidence Intervals

ed
A 95% confidence interval for the population mean, ,
± 1.96
√

Significance Interpretation

( = 1) ≤ ×
Ex
Learning Module 7: Introduction to Linear Regression
s
= + + ⋯+ + , = 1, 2, … ,
si

where: = Dependent variable

= Independent variable
= Intercept
oe

= Slope coefficient, = 1, 2, … ,
= Error term
, , … , = Regression coefficients
N

= + +

where: = Estimated value on the regression line for the ith observation
= Intercept
= Slope
= Residual for the ith observation

∑ ( − )( − )
= =
∑ ( − )
= −

15
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Sum of Squares Total, =∑ ( − ) = +

Sum of Squares Regression, =∑ −
Sum of Squares Error, =∑ − =∑

Coefficient of Determination,

= =1−

Correlation coefficient,

=
( )( )

ed
Note: Correlation coefficient =

Sample standard deviation of X

=
∑
Ex
( − )
−1

Sample standard deviation of Y

∑ ( − )
s
=
−1
si

Homoskedasticity
( )= , = 1, 2, … ,
oe

ANOVA F-Test

Mean square regression (MSR)

=
N

Mean square error (MSE)

=
− −1

F-distributed test statistic

=
where: = Number of observations
= Number of independent variables

16
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Standard error of estimate

∑ −
=√ =
− −1

Hypothesis Test of the Slope Coefficient

−
=

Degrees of freedom, = − −1

where: = Hypothesized population slope

ed
= Standard error of the slope coefficient
=
∑ ( − )

Hypothesis Test of the Intercept

Ex=
−

Standard error of the intercept,

s
1
= +
si

∑ ( − )

Prediction Intervals
oe

± ⁄ ×

where: = +
N

Variance of the prediction error of Y, given X

1 −
= 1+ +
( − 1)

Standard error of the forecast

1 −
= 1+ +
( − 1)

17
CFA Level 1 (2023) Formula Sheet – Noesis Exed

The Log-Lin Model

ln = +

The Lin-Log Model

= + ln

The Log-Log Model

ln = + ln

ed
Ex
s
si
oe
N

18
CFA Level 1 (2023) Formula Sheet – Noesis Exed

ECONOMICS

Learning Module 1: Topics in Demand and Supply Analysis

Inverse demand function (Demand curve), = +

Price elasticity of demand

%Δ Δ
= =
%Δ Δ

Income elasticity of demand

ed
%Δ Δ
= =
%Δ Δ

Cross-Price elasticity of demand

%Δ Δ

Supply Analysis
=
%Δ Ex =
Δ

Total cost of production

s
= × + ×
where: = Wage rate
si

= Labor hours
= Hours of capital
= Rental rate of capital
oe

Total product =

, =
N

Δ
, =
Δ

Economic profit = Total revenue – Total economic costs

Accounting profit = Total revenue – Total accounting costs

= × = ×

19
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Δ Δ
= = +
Δ Δ

Δ
=
Δ

Short-run marginal cost

ed
=

Total cost = Total fixed cost + Total variable cost

Ex
Average total cost = Average fixed cost + Average variable cost
s
Total profit = Total revenue – Total cost
si

Profit maximization occurs when = and is not falling.

Learning Module 2: The Firm and Market Structures

oe

Marginal revenue
1
= 1−
N

where: = Price
= Price elasticity of demand

Concentration Ratio

= ( ℎ )

Herfindahl-Hirschman Index (HHI)

= ( ℎ )

20
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Learning Module 3: Aggregate Output, Prices, and Economic Growth

= ×

= ×

= × 100

ed
= × 100

Components of GDP
= + + +( − )
where:
= Gross domestic product
= Consumer spending
= Gross private domestic investment
Ex
= Government spending
= Exports
s
= Imports
si

Gross domestic income

= Net domestic income + Consumption of fixed capital + Statistical discrepancy
oe

Gross domestic income = Compensation of employees + Gross operating surplus

+ Gross mixed income + Taxes less subsidies on production
+ Taxes less subsidies on products and imports
N

Household primary income = Compensation of employees + Net mixed income

+ Net property income

Household saving = Personal disposable income – Household final consumption expenditure

+ Change in pension entitlements

Household net saving = Personal disposable income – Net current transfers paid
– Household final consumption expenditure
+ Change in pension entitlements

21
CFA Level 1 (2023) Formula Sheet – Noesis Exed

ℎ
=

= +( − )+( − )

where = Domestic savings

= Net taxes

Marginal propensity to save = 1 – Marginal propensity to consume

=1−

ed
, =

, =

% ℎ
=
% ℎ
−
% ℎ Ex
The Production Function
s
= ( , )
where:
si

= Level of aggregate output in the economy

= Quantity of labor (or number of workers in the economy)
= Capital stock
oe

= Total factor productivity (TFP)

Growth Accounting Equation

ℎ ℎ ℎ ℎ
= + +
N

= Relative share of labor in national income

= Relative share of capital in national income
+ + +
=

ℎ ℎ ℎ
= +

Total hours worked = Labor force × Average hours worked per worker

22
CFA Level 1 (2023) Formula Sheet – Noesis Exed

= =
ℎ

= ℎ ×

ℎ ℎ
= +
ℎ ℎ

Learning Module 4: Understanding Business Cycles

Measuring Inflation

ed
= × 100

ℎ = × 100

ℎ =
Ex × ℎ

ℎ
, =
ℎ
s
Learning Module 5: Monetary and Fiscal Policy
si

1
=
oe

=
N

Quantity equation of exchange

× = ×

where: = Quantity of money

= Velocity of circulation of money
= Average price level
= Real output

Fisher effect
= +

23
CFA Level 1 (2023) Formula Sheet – Noesis Exed

The Fiscal Multiplier

1
=
1 − (1 − )
where: = Marginal propensity to consume
= Tax rate

Learning Module 6: Introduction to Geopolitics

No formula

Learning Module 7: International Trade and Capital Flows

ed
Current account balance
= − = + −

where: = Private savings

= Government surplus =
= Private investments
− Ex
Learning Module 8: Currency Exchange Rates
s
ℎ ⁄ = ⁄ ×
si

% ℎ ℎ ≈ %Δ ⁄ + %Δ − %Δ
oe

Percentage change in currency (vs currency )

⁄ − ⁄

⁄
N

Cross-Rate

= ×

Forward Rate
1+ ×
⁄ = ⁄ ×
1+ ×

24
CFA Level 1 (2023) Formula Sheet – Noesis Exed

⁄ = ⁄ + ( )

−
⁄ − ⁄ = ⁄
1+

Marshall-Lerner Condition
+ ( − 1) > 0

where: = Share of exports in total trade

= Share of imports in total trade
= Price elasticity of foreign demand for domestic country exports

ed
= Price elasticity of domestic demand for imports

+ =1

Ex
s
si
oe
N

25
CFA Level 1 (2023) Formula Sheet – Noesis Exed

FINANCIAL STATEMENT ANALYSIS

Learning Module 1: Introduction to Financial Statement Analysis

= +

= −

ℎ = + ℎ ℎ

Learning Module 2: Financial Reporting Standards

ed
No formula

Learning Module 3: Understanding Income Statements

=
−

−
Ex
Net book value of asset = Asset cost – Accumulated depreciation
s
−
=
ℎ ℎ
si

Diluted EPS (for convertible preferred stock)

oe

=
ℎ ℎ ℎ
+
ℎ ℎ

Diluted EPS (for convertible debt)

N

− +
=
ℎ ℎ ℎ
+
ℎ ℎ

Diluted EPS (for options)

−
=
ℎ ℎ
+
ℎ

26
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Using Treasury stock method,

ℎ ℎ ℎ ℎ ℎ
ℎ = ℎ − ℎ ℎ
ℎ

Video (Basic & Diluted EPS): https://youtu.be/2C-mwVqO2SQ

Learning Module 4: Understanding Balance Sheets

For balance sheet ratios, refer to Learning Module 6: Financial Analysis Techniques.

= −

ed
Learning Module 5: Understanding Cash Flow Statements

ℎ ℎ ℎ
ℎ ℎ
ℎ

=
=
Ex
+

+ −
+

ℎ
s
= + ℎ −
si

ℎ
= + ℎ −
oe

ℎ
= + −

ℎ
= + −
N

ℎ
= + −

& = & + −
ℎ

= + −

27
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Note:
ℎ
= −

= + −

Free Cash Flow To Firm (FCFF)

= + + (1 − )− −

where: = Net income

= Non-cash charges (e.g., depreciation and amortization)

ed
= Interest expense
= Capital expenditures
= Working capital expenditures

= + −
= +
Ex
(1 − )−

Free Cash Flow to Equity (FCFE)

= − +
s
where: = −
si

Performance Ratios
oe

ℎ =

ℎ =
N

ℎ =
ℎ ℎ

ℎ =

−
ℎ ℎ =
ℎ

28
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Coverage Ratios

+ +
=

=
ℎ

ed
=
ℎ

=
ℎ
Ex
Learning Module 6: Financial Analysis Techniques
s
Activity Ratios
si

=
oe

ℎ
ℎ =
N

ℎ
=

ℎ
=

ℎ
=

29
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Liquidity Ratios

ed
ℎ+ ℎ +
=

ℎ+ ℎ
ℎ =

=
ℎ+ ℎ
Ex ℎ
+

ℎ
s
= + −
ℎ
si

Video (Cash Conversion Cycle): https://youtu.be/IFsI9c4wUD4

Solvency Ratios
oe

=
N

=
+

30
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Coverage Ratios

+
ℎ =
+

Profitability Ratios

ed
=

=
=
Ex
s
=
si

=
oe

=
N

−
=

31
CFA Level 1 (2023) Formula Sheet – Noesis Exed

DuPont Analysis

= ×

= × ×

= × × × ×

where:

ed
=

Valuation Ratios

⁄ =
ℎ
ℎ
Ex
ℎ
⁄ =
ℎ ℎ
s
ℎ
si

⁄ =
ℎ

ℎ
oe

⁄ =
ℎ

ℎ
ℎ ℎ =
ℎ ℎ
N

ℎ
=
ℎ

=1−

ℎ = ×

32
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Business Risk

Financial Sector Ratios

ed
=

Credit Ratios

=
Ex
=
s
si

−
ℎ =
oe

=
N

Segment Ratios

33
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Learning Module 7: Inventories

Inventory cost (capitalized) = Raw materials + Direct labour + Production overhead

+ Transportation for raw materials

Inventory cost (expensed) = Abnormal waste + Storage of finished goods inventory

= +

ed
= − ℎ

IFRS
= ( )
Ex
= Estimated selling price less estimated costs of completion and costs necessary to
complete the sale

US GAAP
=
s
For last-in, first-out (LIFO) method or retail inventory methods
si

= ( )
oe

Lower limit = −
Upper limit =
N

Video: https://youtu.be/V8C31msIBzs

34
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Learning Module 8: Long-Lived Assets

Video (Capitalizing vs. Expensing): https://youtu.be/c-3D1yuH4xU

Property, Plant, and Equipment (PP&E)

Cost Model
Carrying amount of PP&E = Historical cost – Accumulated depreciation – Impairment loss

Historical cost of PP&E = Purchase price + Delivery cost + Cost to make the asset operable

ed
Goodwill

ℎ
ℎ
= − ℎ

Straight-line method of depreciation

Ex
=
−

Double-Declining Balance method

2
s
= ×( − )
si

Video: https://youtu.be/6RskYAxdAFk

Units-of-Production method
oe

= ×( − )

Impairment of PP&E (IFRS)

N

= −

Recoverable amount = HIGHER of its Fair value less costs to sell AND its value in use

Value in use = Present value of expected future cash flows

Impairment of PP&E (US GAAP)

If carrying amount > Undiscounted expected future cash flows

Impairment loss = Carrying amount of PP&E – Fair value of PP&E

35
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Disclosures
= +

&
=

&
=

ed
Learning Module 9: Income Taxes

ℎ
= +

= − Ex ℎ
ℎ

=
s
Learning Module 10: Non-Current (Long Term) Liabilities
si

= ×
oe

Effective Interest Rate method

= ×
N

= + −

Video: https://youtu.be/wv0gFrbJQu8

Derecognition of Debt

ℎ ℎ ℎ
= −
ℎ

36
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Learning Module 11: Financial Reporting Quality

Nothing new

Learning Module 12: Applications of Financial Statement Analysis

=
ℎ ℎ & +

ed
Ex
s
si
oe
N

37
CFA Level 1 (2023) Formula Sheet – Noesis Exed

CORPORATE ISSUERS

Learning Module 1: Corporate Structures and Ownership

No formula.

Learning Module 2: Introduction to Corporate Governance and Other ESG Considerations

No formula.

Learning Module 3: Business Models and Risks

ed
( )=

where: Contribution margin = Selling price per unit – Variable cost per unit

= ×
Ex
=
s
=
si

Learning Module 4: Capital Investments

oe

Net Present Value (NPV)

= −
(1 + )
N

where: = After-tax cash flow at time

= Required rate of return for the investment
= Investment cash flow at time zero

Internal Rate of Return (IRR)

= − =0
(1 + )

Video: https://youtu.be/bzck7QLhICw

38
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Return on Invested Capital (ROIC)

Real Options
= − +

Learning Module 5: Working Capital and Liquidity

= −

ed
ℎ = −
ℎ ( )

%
= 1+
Ex
100 − %

Learning Module 6: Cost of Capital – Foundational Topics

Weighted Average Cost of Capital

= (1 − ) + +
s
where:
si

= Target weight of debt in capital structure

= Target weight of preferred stock in capital structure
= Target weight of common stock in capital structure
oe

= Before-tax marginal cost of debt

= Marginal tax rate
(1 − ) = After-tax marginal cost of debt
= Marginal cost of preferred stock =
N

= Marginal cost of common stock

Capital Asset Pricing Model (CAPM)

( )= + [ ( )− ]

where: = Risk-free rate

= Beta of stock
( ) = Expected return on market
( )− = Expected market risk premium

39
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Historical Equity Risk Premium

= −

Bond Yield Plus Risk Premium Approach

= +

where: = Before-tax cost of debt

Estimating Beta for Public Companies

2 1
= × +
3 3

Estimating Beta for Thinly Traded and Nonpublic Companies

1
=
1 + (1 − )

where: = Equity beta of peer company

= Unlevered beta (or asset beta)
= Debt-to-equity ratio of peer company
= Marginal tax rate of peer company

= 1 + (1 − )

where: = Equity beta of nonpublic company

= Debt-to-equity ratio of nonpublic company
= Marginal tax rate of nonpublic company

Flotation Costs (Video: https://youtu.be/T8pJ4bwPo48)

= +
−

= +
(1 − )
where: = Cost of equity
= Expected dividend = (1 + )
= Current stock price
= Flotation cost per share (in monetary terms)
= Flotation cost as a percentage of the issue price
= Growth rate

40
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Learning Module 7: Capital Structure

= − ℎ ℎ

= −
= − +

= + +
= −

Modigliani-Miller Proposition I
= + ×

where: = Value of levered firm

= Value of unlevered firm
= Marginal tax rate
= Debt
× = Debt tax shield
(1 − )
=
( − × )(1 − )
=

= Annual cash flow to equityholders

Modigliani-Miller Proposition II

= +( − )(1 − )

= +( − ) (1 − )

= (1 − ) +
+ +

where: = Cost of equity

= Cost of equity of an unlevered firm
= Equity beta
= Asset beta
= Debt beta

Static Trade-Off Theory of Capital Structure

= + × − ( )

41
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Learning Module 8: Measures of Leverage

Degree of Operating Leverage

% ℎ
=
% ℎ

( − )
= =
( − )−

where: = Quantity of units sold

= Selling price per unit
= Variable cost per unit
= Fixed operating costs

Degree of Financial Leverage

% ℎ
=
% ℎ

( − )−
= =
( − )− −

where: = Fixed financial costs

Degree of Total Leverage

% ℎ
=
% ℎ

( − )
= =
( − )− −

= ×

Breakeven Number of Units

+
=
−

Operating Breakeven Number of Units

=
−

42
CFA Level 1 (2023) Formula Sheet – Noesis Exed

EQUITY INVESTMENTS

Learning Module 1: Market Organization and Structure

1
=
Minimum margin requirement

Total return on leveraged stock investment:

+ − − −
= −1
ℎ
+

= × ℎ

Video (Return on Leveraged Stock Position): https://youtu.be/tZd4XtvjjlI

(1 − )
=
(1 − )

Learning Module 2: Security Market Indexes

∑
Price Return Index, =

where: = the number of units of constituent security i held in the index portfolio
= the number of constituent securities in the index
= the unit price of constituent security i
= value of the divisor

−
Price return of an index, =

− +
Total Return Index, =

where: = value of the price return index at the end of the period
= value of the price return index at the beginning of the period
= total income (dividends and/or interest) from all securities in the index held
over the period

43
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Weighting Methods

Price weighting, =
∑

Video (Recalculating the divisor of a price weighted index): https://youtu.be/eYiZNK-ETrg

1
Equal weighting, =

Market-capitalization weighting, =
∑

Float-adjusted market capitalization weighting, =

∑

where: = fraction of shares outstanding in the market float

= number of shares outstanding of security i
= share price of security i
= number of securities in the index

Fundamental weighting, =
∑

where: Fi denotes a fundamental size measure of company i

Learning Module 3: Market Efficiency

No formula

Learning Module 4: Overview of Equity Securities

Return on Equity (using average total book value of equity)

=
( + )/2

Return on Equity (using beginning book value of equity)

=

where BVE = book value (Assets – Liabilities)

44
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Learning Module 5: Introduction to Industry and Company Analysis

No formula.

Learning Module 6: Equity Valuation: Concepts and Basic Tools

Intrinsic value of a share (at = 0):

= +
(1 + ) (1 + )

where: = expected dividend in year t

= required rate of return on stock
= expected price per share at t = n (terminal value)

Value of preferred stock (non-callable, non-convertible, perpetual)

=

Value of preferred stock (non-callable, non-convertible, maturity at time n)

= +
(1 + ) (1 + )

Gordon Growth Model

(1 + )
= =
− −

Sustainable growth rate

= ×

where b = earnings retention rate (1 – Dividend payout ratio)

Video: https://youtu.be/MnfRRRhuGpA

Two-Stage Dividend Discount Model

(1 + )
= +
(1 + ) (1 + )

where: = Long-term stable growth rate

= Short-term growth rate
(1 + ) (1 + )
= =
− −

45
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Justified forward P/E

=
−
Enterprise Value
ℎ
= + + − ℎ

Asset-based Valuation
= −

46
CFA Level 1 (2023) Formula Sheet – Noesis Exed

FIXED INCOME

Learning Module 1: Fixed-Income Securities: Defining Elements

Deferred Coupon Bond

Video: https://youtu.be/erRbAUOGIyM

Convertible Bonds

ℎ
= ×

= −

Learning Module 2: Fixed-Income Markets: Issuance, Trading, and Funding

No formula.

Learning Module 3: Introduction to Fixed-Income Valuation

= +
(1 + ) (1 + )

where: = spot rate or zero rate for period t

n = remaining term to maturity

Full Price, Flat Price, and Accrued Interest (Video: https://youtu.be/l7G075JAu5w)

PVFull = PVFlat + Accrued Interest

= × (1 + ) /

where: Accrued Interest = ×

t = number of days from the last coupon payment to the settlement date
T = number of days in the coupon period
t/T = fraction of the coupon period that has gone by since the last payment
= price on the previous coupon date (before the settlement date)

47
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Value of Floating Rate Note (FRN)

+ + +
× × × +
= + + ⋯+
+ + +
1+ 1+ 1+

where QM = Quoted Margin;

DM = Discount Margin
= periodicity
FV = Face Value of FRN

Video: https://youtu.be/zqYOtVLkYR8

Periodicity Conversion

1+ = 1+

−
+
=

= −

Yield Measures for Money Market Instruments

Discount Rate Basis

= × 1− ×
where:
= present value of money market instrument
= future value paid at maturity
= number of days between settlement and maturity
= number of days in the year
= discount rate (stated as annual percentage rate)

Add-on Rate Basis

=
1+ ×

48
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Forward Rates, IFR

(1 + ) × (1 + , ) = (1 + )

Note: If YTM is stated as semiannual bond basis, remember to divide YTM by 2

0 A
−
,

Yield Spreads

= −

= −

OAS = Z-spread – Option value (in bps)

Learning Module 4: Introduction to Asset-Backed Securities

Single Monthly Mortality Rate (SMM)

ℎ ℎ
=
ℎ
−
ℎ ℎ ℎ ℎ

Learning Module 5: Understanding Fixed-Income Risk and Return

Horizon Yield
+
ℎ
=
(1 + )

Video: https://youtu.be/Bq1FG1jQV2M

49
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Duration Measures
1+ 1 + + [ × ( − )]
= − −
× [(1 + ) − 1] +

=
1+

where = yield per period

= coupon rate
= remaining term to maturity

Video: https://youtu.be/USgjcdCk7Fs

%∆ ≈− ×∆

( )−( )
≈
2 × (∆ )×( )

Effective Duration
( )−( )
=
2 × (∆ )×( )

Portfolio Duration

Portfolio duration = ∑ ×

where is the weight of the market value of Bond i

Key Rate Duration

1 Δ
=− ×
Δ

Money Duration

Money duration = ×

∆ ≈− ×∆

1
%∆ ≈− ×∆ + × × (∆ )
2

50
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Convexity
( )+( ) − 2( )
≈
(∆ ) ×( )

1
∆ ≈− ×∆ + × × (∆ )
2

( )+( ) − 2( )
=
(∆ ) ×( )

Duration Gap

Duration gap = Macaulay duration – Investment horizon

Learning Module 6: Fundamentals of Credit Analysis

= +

1
%∆ ≈− ×∆ + × × (∆ )
2

DERIVATIVES

Learning Module 1: Derivative Instrument and Derivatives Market Features

No formula.

Learning Module 2: Forward Commitments and Contingent Claim Features and

Instruments

Forward Contract

Long Forward payoff = − ( )

Short Forward payoff = −[ − ( )]

Futures Contract

Long Futures daily mark-to-market = ( )− ( )

Short Futures daily mark-to-market = −[ ( ) − ( )]

51
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Options Contract

LONG Call option

, = max(0, − )

, Π = max(0, − )−

where: = Call premium

= Exercise/Strike price
= Spot price at expiration

SHORT Call option

, = − max(0, − )

, Π = −[max(0, − )− ]

LONG Put option

, = max(0, − )

, Π = max(0, − )−

SHORT Put option

, = − max(0, − )

, Π = −[max(0, − )− ]

Credit Default Swap (CDS)

ℎ =Δ × ×

In a credit event, payment from CDS seller to CDS buyer ≈ (%) ×

Learning Module 3: Derivative Benefits, Risks, and Issuer and Investor Uses

No formula.

52
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Learning Module 4: Arbitrage, Replication, and the Cost of Carry in Pricing Derivatives

If there are no underlying costs or benefits:

Forward price, ( )= (1 + )

If there are underlying costs or benefits in present value terms:

Forward price, ( ) = [ − ( )+ ( )](1 + )

where: = Current spot price

= Risk-free rate
= Tenor of forward contract

Under continuous compounding, ( ) =

Under continuous compounding, with income ( ) and cost ( ) expressed in %:
( )
( )=

Foreign Exchange Forward Contract

( )= ( ) ( )
, ⁄ , ⁄

Learning Module 5: Pricing and Valuation of Forward Contracts and for an Underlying
with Varying Maturities

Value of LONG Forward Prior to Expiration

( )=0

( ) ( )
( )= − = − ( ) × (1 + )
(1 + )

( )= − ( )

If the asset incurs cost or generates income from time through maturity,
( )
( )=[ − ( )+ ( )] − ( ) × (1 + )

For foreign exchange forward contract,

( )
( )= , ⁄ − , ⁄ ( )×

53
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Value of SHORT Forward Prior to Expiration

( )=0

( )
( )=− −
(1 + )

( ) = −[ − ( )]

Interest Rate Forward Contracts (Forward Rate Agreements (FRA))

(1 + ) × (1 + , ) = (1 + )

where: = Spot rate for periods

= Spot rate for periods
, = Implied forward rate for ( − ) periods, starting in periods

Payoff for a Long FRA = − , × ×

Payoff for a Short FRA = − − , × ×

Learning Module 6: Pricing and Valuation of Futures Contracts

If there are no underlying costs or benefits:

Futures price, ( ) = (1 + )

If there are underlying costs or benefits in present value terms:

( )=[ − ( )+ ( )](1 + )

Under continuous compounding, ( )=

Under continuous compounding, with income ( ) and cost ( ) expressed in %:

( )
( )=

Foreign Exchange Forward Contract

( )= ( ) ( )
, ⁄ , ⁄

Interest Rate Futures Contract

, = 100 − 100 × ,

, = Futures price for a market reference rate for ( − ) periods that begins in
periods

54
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Futures contract basis point value, = × 0.01% ×

Learning Module 7: Pricing and Valuation of Interest Rates and Other Swaps

For a fixed-rate payer in an interest rate swap:

=( − )× ×

For a fixed-rate receiver in an interest rate swap:

=( − )× ×

where: = Fixed swap rate

= Market reference rate

Value of a pay-fixed interest rate swap on a settlement date after inception

= + Σ( ) − Σ( )

Value of a receive-fixed interest rate swap on a settlement date after inception

= + Σ( ) − Σ( )
Learning Module 8: Pricing and Valuation of Options

Option value = Exercise value + Time value

( )
= 0, − (1 + )

( )
= − 0, − (1 + )

( )
= 0, (1 + ) −

( )
= − 0, (1 + ) −

( )
Lower bound of call option value = 0, − (1 + )

Upper bound of call option value =

( )
Lower bound of put option value = 0, (1 + ) −

Upper bound of put option value =

55
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Learning Module 9: Option Replication Using Put-Call Parity

Put-Call Parity
+ = + (1 + )

Put-Call Forward Parity

( )(1 + ) + = + (1 + )

Value of the Firm

= + ( )−

Value of debt = ( )−

Value of equity =

Learning Module 10: Valuing a Derivative Using a One-Period Binomial Model

Risk-neutral probability of a price increase in underlying

1+ −
=
−
where: = Up factor = >1

= Down factor = <1

Video: https://youtu.be/ymUlKgz-rAw

Hedge ratio
−
ℎ∗ =
−
where: = max(0, − )
= max 0, −

Riskless portfolio with a Call: of the underlying, , and short call position,

=ℎ −
=ℎ −
=ℎ −

56
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Riskless portfolio with a Put: of the underlying, , and long put position,

=ℎ +
=ℎ +
=ℎ +

Value of a one-period call option

+ (1 − )
=
1+

Value of a one-period put option

+ (1 − )
=
1+

where: = max(0, − )
= max 0, −

Video: https://youtu.be/bXEC-78y_AU

57
CFA Level 1 (2023) Formula Sheet – Noesis Exed

ALTERNATIVE INVESTMENTS

Learning Module 1: Categories, Characteristics, and Compensation Structure of

Alternative Investments

No formula.

Learning Module 2: Performance Calculation and Appraisal of Alternative Investments

−
ℎ =

−
=

Multiple on Invested Capital

+
=

Calculating Hedge Fund Fees and Returns

Management Fee Based on Beginning Market Value

%
= ×

Management Fee Based on Ending Market Value

%
= ×

Incentive Fee Calculated Independent of Management Fee

%
= ×

58
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Incentive Fee Calculated Net of Management Fee

%
= ×( − )

Incentive Fee with Hard Hurdle (Independent of Management Fee)

%
= ×( − )

Incentive Fee with Hard Hurdle (Net of Management Fee)

%
= ×( − − )

Note: 1) No incentive is paid if hedge fund incurs loss for the year.
2) Gain may be subject to high watermark.

Video: https://youtu.be/0DKmCgsAAdc

Learning Module 3: Private Capital, Real Estate, Infrastructure, Natural Resources, and
Hedge Funds

No formula.

59
CFA Level 1 (2023) Formula Sheet – Noesis Exed

PORTFOLIO MANAGEMENT

Learning Module 1: Portfolio Management: An Overview

No formula.

Learning Module 2: Portfolio Risk and Return: Part I

Time-Weighted Rate of Return

⁄
= [(1 + ) × (1 + ) × … (1 + )]

where: = Time-weighted return for year

Annualized Return

= 1+ −1

= 1+ −1

Holding Period Return

− +
=

Real Returns
1+
=
1+

where = inflation rate

Indifference Curves

Utility function, = ( )−

where: U = utility of an investment

( ) = expected return
= variance of the investment (use decimal)
= measure of risk aversion

60
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Capital Allocation Line (CAL)

( )−
= +

( )
where: = market price of risk

Two-asset portfolio

Portfolio expected return, = +

Portfolio variance, = + +2 ( , )

Portfolio standard deviation, = + +2 ( , )

Note: 1) ( , )=
( )
2) n securities requires n variances and covariances

Video: https://youtu.be/lUwulZ9ONC0

A portfolio that consists of the two-asset portfolio and the risk-free asset will have:

( )= +

( )=

Portfolio of Many Risky Assets

−1 −1
= + = +

Condition for adding new asset to current portfolio

( )− −
> × ,

61
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Learning Module 3: Portfolio Risk and Return: Part II

Capital Market Line (CML)

( )−
= + (1 − ) ( )= +

= (1 − )

Beta of security

( , ) ,
= =

Portfolio beta, =∑

Total variance = Systematic variance + Nonsystematic variance

= +

Total risk, = +

Capital Asset Pricing Model

( )= + ( )−

The Market Model

= + +

Portfolio Performance Appraisal Measures

−
Sharpe ratio =

−
Treynor ratio =

= − +

ℎ = − + −

Jensen’s Alpha, = − + −

62
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Security Characteristic Line (SCL)

− = + −

Information ratio =

Note: The ratio above should be called the Appraisal ratio but for consistency with the
textbook, I kept the name as Information ratio.

Learning Module 4: Basics of Portfolio Planning and Construction

No formula.

Learning Module 5: The Behavioral Biases of Individuals

No formula.

Learning Module 6: Introduction to Risk Management

No formula.

Learning Module 7: Technical Analysis

Head and Shoulders Pattern

= −( − )

Inverse Head and Shoulders Pattern

= +( − )

Double Top Pattern

= −( ℎ − )

63
CFA Level 1 (2023) Formula Sheet – Noesis Exed

Rate of Change (ROC) Oscillator

=( − ) × 100

where: = Momentum oscillator value (oscillates above and below 0)

= Most recent closing price
= Closing price days ago, typically 10 days

= × 100

where: = Momentum oscillator value (oscillates above and below 100)

Relative Strength Index

100
= 100 −
1+

where:
Σ( ℎ ℎ )
=
Σ( ℎ ℎ )

Stochastic Oscillator

− 14
% = 100
14 − 14

where:
= Latest closing price
14 = Lowest price in the past 14 days
14 = Highest price in the past 14 days
% = Average of the last three %K values calculated daily

Learning Module 8: Fintech in Investment Management

No formula.

64