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CF
FA Level 1 F
Formula Sh
heet

QUA
ANTITAT
TIVE METHODS
I

TIM
ME VALUE
E OF MON
NEY
alue Of A Single
S
Cash Flow
Thee Future Va
Where:
FV = Future
F
Valuue
PV = Present
P
Valuue

FV PV 1 r N
r = Annual
A
Inteerest Rate
N = Number Of
O Years

Thee Present Value

Va
Of A Single
S
Cash
h Flow

PV
V

PV
V

FV
V

PV

1 r

FV

1 r

Pressent Value Of Perpetu

uity

PV
V perpettuity

Con
ntinuous Co
ompoundin
ng And Futu
ure Values
F
FV =PVe

fective Annu
ual Rates
Effe

EA
AR = (1 + Periodic interest raate)N - 1
Nett Present Vaalue

NPV

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CF
1

rr

Where
W
C t = The Exxpected Nett Cash Flow
CF
w at Time t
N = The Inveestments Projected
P
Life
r = The Disccount Rate or
o Appropriate Cost of Capital

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CF
FA Level 1 F
Formula Sh
heet

II

YIE
ELDS
nk Discountt Yield
Ban

Where:
r = Thhe annualiseed yield on a bank discoount basis
P = Purch
hase Price
F = The face
f
value oof the bill
t = Numbber of days remaining until
u
maturiity

Hollding Periodd Yield

HP
PY =

Wheree:
P0 = in
nitial price of
o the investtment.
P1 = prrice received from the instrument
i
at
maturity/sale.
nterest or divvidend received from thhe
D1 = in
investm
ment.

Effe
fective Annu
ual Yield

EA
AY= 1

HPY

Where:
h
period yield
HPY = holding
t = numbbers of days remaining till maturityy

Mon
ney Markett Yield

360 r
60
t r
36
HP
PY

36
60
t

nd Equivaleent Yield
Bon

BEY

III
I

Y
EAY

Wherre:
EAY
Y = Effectivee Annual Yield
Y

FRE
EQUENCY
Y DISTRIB
BUTIONS
Relaative Frequ
uency Distriibution

Relativee
Frequenccy

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Absolutte Frequeency
Tottal Number of Observationss

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CF
FA Level 1 F
Formula Sh
heet

IV
I

ME
EASURES OF
O CENTR
RAL TEND
DENCY
Poppulation Meean

Wherre:
Xi = Is
I the ith obbservation

Sam
mple Mean

x
n

Geoometric Meaan

R
OR
X X X X

G=

With: Xi 0 for I = 1,22,, n

Where:
R = periodiic returns orr HPY
X = (1+HP
PY)
T = No. of years.

Harrmonic Meaan

With: Xi > 0 for I = 1, 2, , N

Meddian

M
Median

Value of
f the

1
2

th item
m in an arrrayed data set

Percentiles

Ly =

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Wherre:
Y= percentage
p
point
p
at whicch distributiion is divided
Ly = location
l
(L)) of the perccentile (Py) in the ascennding arrayeed data set

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CF
FA Level 1 F
Formula Sh
heet

ME
EASURES OF
O DISPER
RSION
Ran
nge

Raange M
Max value Min value
Meaan Absolutee Deviation
n

MAD

|X
n

Where:
W
n = Numberr of items inn the data seet
X = The arithhmetic mean
n of the sam
mple
Xi = Observvation i

X|

Poppulation Va
ariance

X
N

Wherre:
Xi = Observatioon i
= Population
P
m
mean
N = Size
S of the population
p

Poppulation Sta
andard Devviation

X
N

Sam
mple Varian
nce

Sample Vaariance

X
X
n 1

Whhere n = Sam
mple Size

Sam
mple Standaard Deviatioon

X X
n 1

Coef
efficient Off Variation

C
Coefficientt of Varia
ation

s
X

Wherre:
s = Sample stand
dard deviatiion
X The sample
T
e mean

Shaarp Ratio

Sh
harpe Rattio =

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Wherre:
R
Mean porttfolio returnn
R
Risk-free return
r
Standard Deviation
D
off portfolio returns

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CF
FA Level 1 F
Formula Sh
heet
Sam
mple Skewn
ness

1

n

X
s

X
s

Wh
here:
s = Sample staandard deviiation
n = Sample size; where n 30

Sam
mple Kurtossis

1

n

Exccess Kurtosiis

Exxcess Kurrtosis

Wherre:
s = Sample stand
dard deviatiion
S
size;; where n 30
n = Sample

Wherre:
K = Kurtosis off a distribution

nequality
Cheebyshevs In

AT LEAST 1

VI
V

1
k

Where:
k is the nuumber of staandard deviiations

PRO
OBABILIT
TY
Oddds For An Event
E

P E
1 P E
Oddds Against An
A Event

P E
P E

P
es
Multiplication Rule For Probabilitie

P A or B P A P B P
P AB
P A or B P A P B

General Ruule and Indeependent evvents

Exclusive
Mutually E

ndant Facto
tors
Thee Total Probbability Rulle for n Posssible Depen

P A P A|F
A 1 P F1 P A|F2 P
P F2 P A|Fn P Fn
Where: the set of factors {F
{ 1, F2,, Fn} is mutuaally exclusivve and exhaaustive.
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CF
FA Level 1 F
Formula Sh
heet
Exppected Valu
ue

E X P X1 X1 P
P X2 X2 P Xn Xn

Wheree:
Xi = on
ne of n posssible outcom
mes
P (Xi) = probabilitty of event Xi

P X X

E X

Varriance and Standard

S
D
Deviation

P X X

Where:
W
E
E(X)
is the mean or exxpected retuurns of assett X

E X

Covvariance

Co
ov RA, RB

E RA E RA

RB E RB

Corrrelation Cooefficient
,

Co
orr RA, R
RB RA, RB
Exppected Return on a Porrtfolio

E (Rp) =

w E R

w E R

Where weight of
o asset i =

w E R

w E R

Porrtfolio Varia
ance

Var R

w w Cov
v R ,R

Varriance of a 2 Asset Porrtfolio

V
Var (Rp) = w2A (RA) + w2B (RB) + 2w
2 AwB Coov(RA, R B)
V
Var (Rp) = w2A (RA) + w2B (RB) + 2w
2 AwB (R
( A,RB)
Bayyes Formulla

P Event | IInformatiion

Where: P(I andd E) is the jooint probabiility of Infoormation andd Event

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CF
FA Level 1 F
Formula Sh
heet

VII
V

CO
OUNTING AND
A
LABE
ELLING
Cou
unting Rulees
Thee number off different ways
w
that thee k tasks cann be done, if
i each task is done
IF k n then total
t
outcom
mes are n1 n2 n3 n
k.
IF k = n then tootal outcom
mes are N!

ways:

mbinations
Com
nCr

! !

r
is not
n importan
nt
When ranking

Perm
mutations
nPr

VIIII

! !

g is importannt
Whhen ranking

PRO
OBABILIT
TY DISTRIIBUTIONS AND HYP
POTHESIS TESTING
Thee Binomial Distribution
D
n

P X x

!
!

np

np 1 p
p

Thee Continuou
us Uniform
m Distributioon

P XLow X XHigh

Whhere:
a and b aree the lowestt and highesst values in a given
range

nfidence Intervals for a Normallyy Distributedd Variable (X)

Con

CIIconfidence% Z
Zconfidence%
%
Zx
Contacct us:
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Confid
dence Leveel
68%
90%
95%
99%

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Z p%
1
1.65
1.96
2.58

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CF
FA Level 1 F
Formula Sh
heet

Royys Safety First

F
Criterioon

SSFRatio

Min

Wh
here:
= is the cllients thresshold returnn.

nvert from Annual

A
Retturns to Con
ntinuously Compound
ded Rates off Return
Con

rCC In 1 r
1
rAA e
Thee Sampling Distributioon of

and
d the Centrral Limit Th
heorem

Saampling E
Error of th
he mean Samplee mean Populatio
P
n mean X

Standard error of sam

mpling meaan when x is population standardd deviation

mple mean when

w
Sx = sample
s
stand
dard deviatiion
Standard error of sam

Dettermining Confidence
C
I
Intervals
fo
or Populatioon Means Using
U
Sampple Data
%

Studdents t-Disstribution

d
d of f
n 1
Gen
neral Proceedures of Peerforming Hypothesis
H
Tests

,X

,X

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. .

n
t

s
,

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CF
FA Level 1 F
Formula Sh
heet
Testt Statistics

Teest statisttics

Pow
wer of a Tesst

Po
ower of a test 1 P Type II error
T
c
Chii Squared Test-Statistic
Where:

mple size
n = sam
2 =
s2 = sam
mple varian
nce
= hyypothesized
d for populaation variannce
Test
Testt Statisticc for the F-T
Where:
mple drawnn from Popuulation 1
s = Varriance of sam
F
s
Varriance of saample drawnn from Popuulation 2
NOTE: Always
A
put the bigger variance on
o top!

IX
I

TECHNICAL ANALYSIIS
Low
w Price Targ
rget using Head
H
and Sh
houlders Paattern (postt uptrend)

Prrice targeet Necklline Heead Neck

kline
mentum or Rate of Ch
hange Oscilllator
Mom
W
With
100 as origin
o
M = (P Pt ) 100
W
Where:
M = momenttum oscillattor value
P = last closing price
p
10 dayys ago
Pt = closing price
Arm
ms Index

Arrms Indexx

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Page |9