Wednesday, May 11, 2011

CFA Level II Formulas, Hardest to Remember

Here is what I've been compiling as the hardest to learn formulas for the memorization phase. Not surprisingly Derivatives accounts for over 50% of the formulas, but after 3 days of writing them out between class homework I think I finally have FRA's, Swaps, and continuous or discrete forwards/futures correct and mechanical. There are some very long formulas that I haven't included in this list (like the high low DDM model), there are also nearly 150 'extremely' important formulas to know (aggregate accruals, FCFF, ect) not included only because they are easy and usually quickly derivable. So here is the abridged list of the hardest of the hard, but still worth knowing. (Click to enlarge).
Shorthand, top to bottom:
D=Dividend Yield
Rxnew=The Xdate yield that is now known at time t
+...+ = repeat first operation for all time periods until last (k) time period
RM=Market Risk Premium, not to be confused with Rm which is market return. This is a academic notation standard that is very important to catch before you start writing corporate finance exams.
rce= Cost of common equity
inf = inflation
FLT = flowthrough of inflation
rr= retention rate (in my opinion much more descriptive than "b" which all the text books use)

8 comments:

  1. Awesome, thanks! Some of these aren't there in Schweser atleast not in the same format - for example - Sharpe2 and P/E flow thru - but possibly in the CFAI material. Have you come across any others as well?

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  2. I have re-annotated the formulas to make them easier to memorize (they still give the same answer of course). After looking through the mock exams it looks like some of the obscure formulas like the H Model can be tested as well.

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  3. nice dude. What program do you use to type formulas on PC?

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  4. word, there is a formula editor in the "insert" tab

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  5. No level can be said to be entirely tough or entirely easy. But still, talking it about it, the complexity of the CFA exam is believed to increase when one progresses from Level 1 to Level 3.



    ~Dana@CodeSpark

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  6. Ah! Stats? Or math? I am not very good at it. I have been looking for Best LSAT Courses and I know it is going to be a part of my course and I need to focus a lot on this. Thanks for sharing this here. Very informative this is, I will share this with my friends as well.

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