CFA Level I 2019 Formula Sheet

U"
Reading 6: Time Value of Money • EAR (with Continuous Compounding) 4. MMWR = ∑.Q`o ()*qRR)_ = 0 (IRR
= EAR = 𝑒 +1 − 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 )3
• PVOA =
%-.
∑PK`) ()*+)_ = 𝑃𝑀𝑇 c ('de)$
f • TWR (when no external CF) = rTWR =
• Nominal Rf i rate = Real Rf i Rate + + -#' 3-#r
Inf P 53K
HPR = rt = -#r
• FVOA = ∑PK`)g𝑃𝑀𝑇K (1 + 𝑟)h =
'
"#$ $ • TWR (for more than one periods) =
• i rate as a growth rate = g = ! & -1 ()*+)$ 3)
%# 𝑃𝑀𝑇 i +
j 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)
"# %# ST OPPWQKk "LlKS+
• PV = ()*+)$ ' = u(1 + 𝑅) )g1 + 𝑅v … +
)3
%-. e1 m×$ '
• PV of Perpetuity = + • PV of Annuity Factor =
i'd!m&j
e1 (1 + 𝑅P )hxy _1
m
• PV (for more than one Compounding • TWR (for the year) = rTWR = [(1+R1)×
+1 32×5 (1+R2)×… (1+R365)] -1 where R1 =
per year) = PV= FVN !1 + 2& 6. PV & FV of Annuity Due -#' 3-#r
'
𝑤ℎ𝑒𝑟𝑒 𝑟; = 𝑠𝑡𝑎𝑡𝑒𝑑 𝑎𝑛𝑛 𝑖 − 𝑟𝑎𝑡𝑒 )3
('de)$ -#r
• PVAD = 𝑃𝑀𝑇 c f + PMT at t =
• FVN = 𝑃𝑉(1 + 𝑟)5 +

• FV (for more than one Compounding PVOA + PMT 6. Bank Discount Yield = BDY = rBD =
{|o %L+3%+QlM
+ 2×5 ()*+)$ 3) therefore Price = Par
per year) = FVN = !1 + 21 & • FVAD = 𝑃𝑀𝑇 i j (1 + 𝑟) = P %L+
+
P × +}~
• FV (for Continuous Compounding) = FVOA ×(1+r) !1 − {|o
&
FVN = 𝑃𝑉𝑒 +1×5
F5!
GH
& Reading 7: Discounted Cash Flow Applications 7. Holding Period Yield = HPY =
(%' 3%r * s' )
• IH
Solving for N = F5()*+) (where LN = %r

U"
natural log) 1. NPV = ∑PK`) ()*+)
_
_ − 𝑐𝑓o
8. Effective Annual Yield = EAY = (1 +
4. Stated & Effective Rates 𝐻𝑃𝑌){|•/K − 1 (Rule: EAY > BDY)
2. IRR (when project’s CFs are perpetuity) =
• Periodic i Rate = pppp
U"
JKLKMN OPP Q RLKM NPV = - IO + qRR = 0 9. Money Market Yield (or CD equivalent
5S ST US2VSWPNQPX %M+QSN; QP YPM ZML+ Yield) rMM:
• Effective (or Equivalent) Ann Rate (%' 3%r * s') • rMM = HPY × !
{|o
&
3. HPR = K
(EAR = EFF%) = (1 + %r
• rMM = (rBD) ×
𝑃𝑒𝑟𝑖𝑜𝑑𝑖𝑐 𝑖 𝑅𝑎𝑡𝑒)2 − 1 "LlM #LƒWM ST K„M .+ML;W+k …Qƒƒ
%W+l„L;M %+QlM
 CFA Level I 2019 Formula Sheet

{|o (+ )
• For Even no of obvs locate ∑$
‘“'(”‘ 3˜)
™
• }~
rMM = {|o3(K)(+ (Rule: rMM> 17. Population Var = s2 =
}~ ) P 5
median at v
rBD) ∑$ ™
‘“'(”‘ 3˜)
10. Bond Equivalent Yield = BDY = • For Odd no. of obvs locate 18. Population S.D = √𝜎 v = œ 5
P*)
Semiannual Yield × 2 median at
v
∑y p ™
‘“'(”‘ 3”)
19. Sample Var = s2 = P3)
Reading 8: Statistical Concepts & Market 9. Mode = obvs that occurs most frequently
Returns in the distribution
∑y p ™
‘“'(”‘ 3”)
20. Sample S.D = s = œ P3)
1. Range = Max Value – Min Value pppp P
10. Weighted Mean = 𝑋 • = ∑Q`) 𝑤Q 𝑋Q =
(w1X1+ w2X2+….+ wnXn) (”‘ 3”p)™
2. Class Interval = i ≥
†3F
where 21. Semi-var = ∑"S+ Lƒƒ ”‘•”p
P3)
‡
y
• i = class interval 11. Geometric Mean = GM = Ž𝑋) 𝑋v … 𝑋P
22. Semi-deviation (Semi S.D) =
• H = highest value with Xi≥0 for i = 1,2,…n.
(”‘ 3”p )™
• L = lowest value, k = No. of classes. √𝑠𝑒𝑚𝑖𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = œ∑"S+ Lƒƒ ”‘•”p
P P3)
12. Harmonic Mean = H.M = pppp
𝑋† = '
∑y
‘“'••‘ ’
3. Absolute Frequency = Actual No of (”‘ 3…)™
Observations (obvs) in a given class 23. Target Semi-var = ∑"S+ Lƒƒ ”‘•… P3)
∑y
‘ ”‘
interval 13. Population Mean = µ = with 𝑋Q > 0 where B = Target Value
5

Oˆ;SƒWKM "+M‰WMPlk
for i = 1,2,.,.,n.
4. Relative Frequency = 24. Target Semi-Deviation =
.SKLƒ 5S ST YˆŠ;
∑y
‘ ”‘
Ž𝑡𝑎𝑟𝑔𝑒𝑡 𝑠𝑒𝑚𝑖𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒 =
14. Sample Mean = 𝑋p = where n =
P
5. Cumulative Absolute Frequency = Add up œ∑"S+ Lƒƒ ”‘•…
(”‘ 3…)™
number of observation in the sample P3)
the Absolute Frequencies
15. Measures of Location: J
6. Cumulative Relative Frequency = Add up sQ;K+QˆWKQSP
25. Coefficient of Variation = CV = !”p&
the Relative Frequencies • Quartiles =
– where s= sample S.D and 𝑋p = sample
sQ;K+QˆWKQSP
• Quintiles = • mean
JW2 ST SˆŠ; QP NLKLˆL;M
7. Arithmetic Mean = 5S.ST SˆŠ; QP K„M NLKLˆL;M • Deciles =
sQ;K+QˆWKQSP
,
)o -MLP %S+KTSƒQS R3-MLP RT R
k 26. Sharpe Ratio =
• Percentiles = Ly = (𝑛 + 1) )oo J.s ST %S+KTSƒQS R
8. Median = Middle No (when observations
are arranged in ascending/descending 27. Excess Kurtosis = Kurtosis – 3
16. Mean Absolute Deviation = MAD =
order)
∑y p
‘“'|”_ 3” |
P
 CFA Level I 2019 Formula Sheet

28. Geometric Mean R ≈ • Multiplication Rule for two 13. Standard Deviation (S.D) =
#L+QLPlM ST R
𝐴𝑟𝑖𝑡ℎ𝑚𝑒𝑡𝑖𝑐 𝑀𝑒𝑎𝑛 𝑅 − independent events = P(A & B) = Ž𝑤)v 𝑅Q + 𝑤vv 𝑅v + 𝑤{v 𝑅{
v
P(AB) = P(A)× P(B)
Reading 9: Probability Concepts • Multiplication Rule for three 14. Correlation (b/w two random variables Ri,
independent events = P(A and B USŠ gR‘ R© h
Rj) = 𝜌g𝑅Q 𝑅¥ h =
1. Empirical Prob of an event E = P(E) = and C) = P(ABC) = P(A) × P(B) ªR‘ תR©

%+Sˆ ST MŠMPK ¢ × P(C)

.SKLƒ %+Sˆ 15. Bayes’ Formula =
8. Complement Rule (for an event S) = P(S) 𝑃(𝐸𝑣𝑒𝑛𝑡|𝑁𝑒𝑤 𝐼𝑛𝑓𝑜𝑟𝑚𝑎𝑡𝑖𝑜𝑛) =
%+Sˆ ST ¢ %(5M• qPTS+2LKQSP|¢ŠMPK)
2. Odds for event E = )3%+Sˆ ST ¢ + P(SC) = 1 (where SC is the event not S) ×
%(5M• qPTS+2LKQSP)
𝑃(𝑃𝑟𝑖𝑜𝑟 𝑝𝑟𝑜𝑏. 𝑜𝑓 𝐸𝑣𝑒𝑛𝑡)
)3%+Sˆ ST ¢ 9. Total Probability Rule:
3. Odds against event E = %+Sˆ ST ¢ 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 (n-1)(n-2)(n-3)…1.
P(A) = P(AS1) + P(AS2) +….+ P(ASn) =
%(O…)
occurred = P(A|B) = ® P(B) ≠ 0. P(A|S1)×P(S1) + P(A|S2)×P(S2)…
%(…) 17. Multinomial Formula (General formula for
P(A|Sn)×P(Sn) P!
labeling problem) = P
5. Multiplication Rule (Joint probability that ' !P™ !…P¯ !

both events will happen): (where S1, S2, …,Sn are mutually exclusive
and exhaustive scenarios) 18. Combination Formula (Binomial Formula)
P!
P(A and B) = P(AB) = P(A|B) × P(B) = P 𝐶+ = gP+h = (P3+)!+!
P(B and A) = P(BA) = P(B|A) × P(A) 10. Expected R = E(wiRi) = wiE(Ri)

where n = total no. of objects and r = no.

6. Addition Rule (Prob that event A or B will 11. Cov (Ri Rj) = ∑PQ`)g𝑝(𝑅Q − 𝐸𝑅Q )hg𝑅¥ −
of objects selected.
occur): 𝐸𝑅¥ h
Cov (Ri Rj) = Cov (Rj Ri) P!
19. Permutation = P 𝑃+ = (P3+)!
P(A or B) = P(A) + P(B) – P(AB) Cov (R, R) = s2 (R)
P(A or B) = P(A) + P(B) (when events are
mutually exclusive because P(AB) = 0) Reading 10: Common Probability Distributions
12. Portfolio Var = s2 (Rp) =
∑PQ`) ∑P¥`) 𝑤Q 𝑤¥ 𝐶𝑜𝑣g𝑅Q 𝑅¥ h
7. Independent Events: 1. Probability Function (for a binomial
s2 (Rp) = 𝑤)v 𝜎 v (𝑅) ) + 𝑤vv 𝜎 v (𝑅v ) + random variable) p(x) = p(X=x) =
• Two events are independent if: 𝑤{v 𝜎 v (𝑅{ ) + 2𝑤) 𝑤v 𝐶𝑜𝑣(𝑅) , 𝑅v ) + P!
P(B|A) = P(B) or if P(A|B) = gP°h𝑝 ° (1 − 𝑝)P3° = = (P3°)!°!V± (1 −
2𝑤) 𝑤{ 𝐶𝑜𝑣(𝑅) , 𝑅{ ) +
P(A) 𝑝)P3° (for x = 0,1,2….n)
2𝑤v 𝑤{ 𝐶𝑜𝑣(𝑅v , 𝑅{ )
 CFA Level I 2019 Formula Sheet

• x = success out of n trials

• n-x = failures out of n trials 6. Roy’s Safety-Frist Criterion = SF Ratio = 14. Continuously compounded return
[¢(RI )3RÆ] associated with a holding period from 0 to
• p = probability of success
ªI
• 1-p = probability of failure T:
• n = no of trials. u¢(RI)3RÈ x
7. Sharpe Ratio = = ªI
R0,T= ln (ST / S0) or 𝑟o,. = 𝑟.3),. +
2. Probability Density Function (pdf) = f(x) 𝑟.3v,.3) + ⋯ + 𝑟o,)
)
8. Value at Risk = VAR = Minimum $ loss
= ² ˆ3L 𝑓𝑜𝑟 𝑎 ≤ 𝑥 ≤ 𝑏 = Where,
0 expected over a specified period at a
°3L specified prob level. rT-I, T = One-period continuously
F(x) = 𝑓𝑜𝑟 𝑎 < 𝑥 < 𝑏
ˆ3L compounded returns
9. Mean (μL) of a lognormal random variable
3. Normal Density Funct = 𝑓(𝑥) = 15. When one-period continuously
= exp (μ + 0.50σ2)
) 3(°3˜)™
𝑒𝑥𝑝 ! & for − ∞ < 𝑥 < + ∞ compounded returns (i.e. r0,1) are IID
ª√v¶ vª ™
10. Variance (σL2) of a lognormal random random variables.
4. Estimations by using Normal Distribution: variable = exp (2μ+ σ2) × [exp (σ2) – 1].
𝐸g𝑟o,. h = 𝐸g𝑟.3),. h + 𝐸g𝑟.3v,.3) h +
• Approximately 50% of all obsv fall in 11. Log Normal Price = ST = S0exp (r0,T) ⋯ + 𝐸g𝑟o,) h = 𝜇𝑇 And
v
the interval 𝜇 ± { 𝜎 Where, exp = e and r0,t = Continuously
compounded return from 0 to T 𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = 𝜎 v g𝑟o,. h = 𝜎 v 𝑇
• Approx 68% of all obvs fall in the
interval 𝜇 ± 𝜎 12. Price relative = End price / Beg price =
• Approx 95% of all obvs fall in the S.D. = σ (r0,T) = σ√𝑇
St+1/ St=1 + Rt, t+1
interval 𝜇 ± 2𝜎
• Approx 99% of all obvs fall in the 16. Annualized volatility = sample S.D. of
where,
interval 𝜇 ± 3𝜎 one period continuously compounded
Rt, t+1 = holding period return on the stock
• More precise intervals for 95% of the returns × √𝑇
from t to t + 1.
obvs are 𝜇 ± 1.96𝜎 and for 99% of the
observations are 𝜇 ± 2.58𝜎. Reading 11: 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:
ª™
mean the point x lies) 𝑧 = =
P
𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑛𝑜𝑟𝑚𝑎𝑙 𝑟𝑎𝑛𝑑𝑜𝑚 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 = rt, t+1= ln(1 + holding period return) or 2. S.D of the distribution of the sample mean
”3˜
(when X is normally distributed) rt, t+1 = ln(price relative) = ln (St+1 / St) = ln ª™
ª
(1 + Rt,t+1) =œ
P
 CFA Level I 2019 Formula Sheet

3. Standard Error of the sample mean: x−µ 6. Test Statistic for a test of diff b/w two pop
• When the population S.D (s) is known 9. t-ratio = t= means (normally distributed, pop var
ª s/ n unknown but assumed equal)
= 𝜎”
Ê =
√P
• When the population S.D (s) is not Reading 12: Hypothesis Testing pppp
(” pppp
' 3” ™ )3(˜' 3˜™ )
known = 𝑠”
; t= where 𝑆Vv = pooled
Ê = where s = sample å™ ™
æ åæ
'/™
√P ä * ç
y' y™
S.D estimate of s = 1. Test Statistic =
𝑺𝒂𝒎𝒑𝒍𝒆 𝑺𝒕𝒂𝒕𝒊𝒔𝒕𝒊𝒄 𝑯𝒚𝒑𝒐𝒕𝒉𝒆𝒔𝒊𝒛𝒆𝒅 𝑽𝒂𝒍𝒖𝒆 𝒐𝒇 𝒑𝒐𝒑 𝒑𝒂𝒓𝒂𝒎𝒆𝒕𝒆𝒓 estimator of common variance =
Ž𝑠𝑎𝑚𝑝𝑙𝑒 𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = 𝒔𝒕𝒂𝒏𝒅𝒂𝒓𝒅 𝒆𝒓𝒓𝒐𝒓 𝒐𝒇 𝒔𝒂𝒎𝒑𝒍𝒆 𝒔𝒕𝒂𝒕𝒊𝒔𝒕𝒊𝒄 ∗ (P' 3))J'™ * (P™ 3))J™™
∑y p ™
‘“'(”‘ 3”)
where 𝑑𝑓 = 𝑛) + 𝑛v −
√𝑠 v 𝑤ℎ𝑒𝑟𝑒 𝑠 v = P3)
P' * P™ 3v
*
when Pop S.D is unknown, the standard 2.
4. Finite Population Correction Factor = fpc error of sample statistic is give by 𝑆”
Ê =

J 7. Test Statistic for a test of diff b/wn two
53P √P
= œi53)j where N= population pop means (normally distributed, unequal
*
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 𝜎”
Ê = pppp
(” pppp
' 3” ™ )3(˜' 3˜™ )
= (Old estimated standard error × fpc) ª t= In this df calculated as
å ™
å ™ '/™
√P ä '* ™ç
y' y™

6. Construction of Confidence Interval (CI) = å ™ å ™ ™

2. Power of Test = 1-Prob of Type II Error ä ' * ™ ç
y' y™
Point estimate ± (Reliability factor × 𝑑𝑓 = ™ ™
å™ å™
Standard error) ä 'ç ä ™ç
”p3˜r y' y™
3. 𝑧 = ã (when sample size is large or y'
*
y™
√y
• CI for normally distributed population
ª
small but pop S.D is known)
with known variance = 𝑥̅ ± 𝑧L/v 8. Test Statistic for a test of mean differences
√P
”p3˜r
(normally distributed populations,
• CI for normally distributed population 4. 𝑧 = (when sample size is large but
J
1 unknown population variances)
with unknown variance = 𝑥̅ ± 𝑧L/v √y
√P pop S.D is unknown where s is sample
where S = sample S.D. Np 3˜èr
S.D) • 𝑡 =
JNp
• sample mean difference = ppp
𝑑 =
7. Student’s t distribution ”p3˜r ) P
J 5. 𝑡P3) = 1 (when sample size is large or ∑Q`) 𝑑Q
µ = 𝑋p ± 𝑡L/v √y
P
√P ∑y p ™
‘“r(N' 3N)
small and pop S.D is unknown and pop • sample variance = 𝑆Nv =
P3)
sampled is normally or approximately
x−µ • sample S.D = Ž𝑆Nv
8. Z-ratio = Z = normally distributed)
σ/ n
 CFA Level I 2019 Formula Sheet

• sample error of the sample mean • 𝑋vv is another chi square random (where V = most recent closing price
ppp = Jè
difference = 𝑠 𝑑 variable with one n degrees of and Vx = closing price x days ago)
√P
freedom • Alternate Method to calculate M =
#
8. Chi Square Test Statistic (for test #±
× 100
12. Spearman Rank Correlation = 𝑟;
concerning the value of a normal
(P3))J ™ 6 ∑PQ`) 𝑑)v
population variance) 𝑋 v = where =1− 5. Relative Strength Index = RSI = 100 −
ªr™ 𝑛(𝑛v − 1) )oo
where
(𝑛 − 1) = 𝑑𝑓 𝑎𝑛𝑑 𝑆 v = • For small samples rejection points for )*RJ
∑(öV l„LPXM; )
∑y p ™
‘“r(”‘ 3”) the test based on 𝑟; are found using RS = ∑(|sS•P l„LPXM;|)
𝑠𝑎𝑚𝑝𝑙𝑒 𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = P3) 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
(P3))J ™
(𝑛 − 2))/v 𝑟;
Lower limit = L = and Upper limit 𝑡 =
™
”é/™ (1 − 𝑟;v ))/v U3F)–
• %𝐾 = 100 !†)–3F)–& where:
(P3))J ™
=U== ™ C = latest closing price, L14 = lowest
”'êé/™ Reading 13: 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 𝑷𝒓𝒊𝒄𝒆 𝒐𝒇 𝒂𝒔𝒔𝒆𝒕 • %D = Average of the last three %K
J'™
𝑷𝒓𝒊𝒄𝒆 𝒐𝒇 𝒕𝒉𝒆 𝑩𝒆𝒏𝒄𝒉𝒎𝒂𝒓𝒌 𝑨𝒔𝒔𝒆𝒕 values calculated daily.
populations) F = J™™
2. Price Target for the 7. Put/Call Ratio (Type of Sentiment
𝑆)v= 1𝑠𝑡 𝑠𝑎𝑚𝑝𝑙𝑒 𝑣𝑎𝑟 𝑤𝑖𝑡ℎ 𝑛) 𝑜𝑏𝑠 𝑆)v = • Head and Shoulders = Neckline – 𝑽𝒐𝒍𝒖𝒎𝒆 𝒐𝒇 𝑷𝒖𝒕 𝑶𝒑𝒕𝒊𝒐𝒏𝒔 𝑻𝒓𝒂𝒅𝒆𝒅
Indicators) = 𝑽𝒐𝒍𝒖𝒎𝒆 𝒐𝒇 𝑪𝒂𝒍𝒍 𝑶𝒑𝒕𝒊𝒐𝒏𝒔 𝑻𝒓𝒂𝒅𝒆𝒅
2𝑛𝑑 𝑠𝑎𝑚𝑝𝑙𝑒 𝑣𝑎𝑟 𝑤𝑖𝑡ℎ 𝑛v 𝑜𝑏𝑠 (Head – Neckline)
𝑑𝑓) = 𝑛) − 1 𝑛𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 𝑑𝑓 • Inverse Head and Shoulders =
8. Short Interest Ratio (Type of Sentiment
𝑑𝑓v = 𝑛v − 1 𝑑𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟 𝑑𝑓 Neckline + (Neckline– Head)
𝑺𝒉𝒐𝒓𝒕 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕
Indicators) = 𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑫𝒂𝒊𝒍𝒚 𝑻𝒓𝒂𝒅𝒊𝒏𝒈 𝑽𝒐𝒍𝒖𝒎𝒆
𝑷𝟏 *𝑷𝟐 *𝑷𝟑 ….*𝑷𝒏
11. Relation between Chi Square and F- 3. Simple Moving Average = 𝑵
”'™í 9. Arms Index TRIN i.e. Trading Index (Type
2
distribution = 𝐹 = ” ™ where: of Flow of funds Indicator) =
™í
P 4. Momentum Oscillator (or Rate of Change
• 𝑋)vis one chi square random variable Oscillator ROC): 𝐴𝑟𝑚 𝐼𝑛𝑑𝑒𝑥 𝑜𝑟 𝑇𝑅𝐼𝑁 =
5S.ST ONŠLP q;;WM; ÷5S.ST sMlƒQP q;;WM;
with one m degrees of freedom #SƒW2M ST ONŠLP q;;WM;÷#SƒW2M ST sMlƒQP q;;WM;
• Momentum Oscillator Value M = (V-
Vx) × 100
 CFA Level I 2019 Formula Sheet

Reading 14: Topics in Demand & Supply 3. Concentration Ratio = 8. GDP = National income + Capital
Analysis C&, 67 B'A+B D'A&+B 67 (E+ A'/F+B( )o 7#/,B consumption allowance + Statistical
G6('A H'/I+( C'A+B
discrepancy
1. Qdx = f(Px, I, Py)
4. Herfindahl-Hirshman Index = Sum of the
9. National Income = Compensation of
N
squares of the market shares of the top N
Price Elasticity of Demand = 𝐸V° = employees + Corp & Govt enterprise
12è±
companies in an industry
% ∆ #$ %&'$(#() *+,'$-+- 2è± 34N° 3%° profits before taxes + Interest income +
% ∆ #$ ./#0+
= 1I± = ! %°
& !4N°& unincorporated business net income + rent
I± Reading 16: Aggregate Output, Prices &
+ indirect business taxes less subsidies
Economic Growth
2. Income Elasticity of Demand = 𝐸qN = 10. Total Amount Earned by Capital = Profit +
% ∆ #$ %&'$(#() *+,'$-+- 34N° 3q 1. Nominal GDP t = Prices in year t ×
= = ! & !4N°& Capital Consumption Allowance
% ∆ #$ 5$06,+ q Quantity produced in year t

3. N
Cross Elasticity = 𝐸Vk = 11. PI = National income – Indirect business
2. Real GDP t = Prices in the base year ×
% ∆#$ %&'$(#() *+,'$-+- 67 866- 9 taxes – Corp income taxes – Undistributed
= = Quantity produced in year t
% ∆ #$ ./#0+ 67 866- : Corp profits + Transfer payments
34N° 3%k
! & !4N°&
%k 3. Implicit price deflator for GDP or GDP
12. Personal disposable income (PDI) =
deflator =
Personal income – Personal taxes OR GDP
4. Total cost of production = TC = (w)(L) + D'A&+ 67 0&//+$( )/ 6&(J&( '( 0&//+$( )/ J/#0+B
×
(r)(K) D'A&+ 67 0&//+$( )/ 6&(J&( '( K'B+ )/ J/#0+B (Y) + Transfer payments (F) – (R/E +
100 Depreciation) – direct and indirect taxes
5. TR = (P)(Q) (R)
4. Real GDP = [(Nominal GDP / GDP
6. MR = ΔTR/ΔQ deflator) ÷ 100] 13. Business Saving = R/E + Depreciation
(%)(34) (4)(3%) ;.
7. MR= + = P + Q ;% L6,#$'A 8*. 14. Household saving = PDI - Consumption
;% ;% 5. GDP deflator = × 100
M+'A 8*.
expenditures - Interest paid by consumers
Reading 15: The firm & Market Structures to business - Personal transfer payments to
6. GDP = Consumer spending on final good
foreigners
& services + Gross private domestic invst
1. In perfect competition, Marginal revenue =
+ Govt. spending on final goods & services
Avg. Revenue = Price = Demand 15. Business sector saving = Undistributed
+ Govt. gross fixed invst + Exp – Imp +
corporate profits + Capital consumption
Statistical discrepancy
2. Marginal Revenue = Price × !1 − allowance
) 7. Net Taxes = Taxes – Transfer payments
&
./#0+ @A'B(#0#() 67 *+,'$-