formula-sheet
CFA Level I Portfolio Management Formula Sheet
Public formula sheet for expected return, variance, CAPM, Sharpe ratio, and performance measurement.
TL;DR
Portfolio formulas combine weighted averages, risk measures, CAPM expected return, and risk-adjusted performance ratios.
Formula Reference
Portfolio expected return
E(Rp) = sum[w_i x E(R_i)]Weighted average of asset expected returns.
Two-asset variance
Var(p) = w1^2 s1^2 + w2^2 s2^2 + 2 w1 w2 cov12Correlation drives diversification benefit.
CAPM
E(Ri) = Rf + beta_i x [E(Rm) - Rf]Required return for systematic risk.
Sharpe ratio
Sharpe = (Rp - Rf) / standard deviation of portfolioExcess return per unit of total risk.
BA II Plus Keystrokes
- Store weights and returns before summing.
- Use x^2 for variance terms.
- Use STO/RCL for market risk premium in CAPM.
Worked Example
- Rf = 3 percent, beta = 1.2, market expected return = 8 percent.
- Required return = 3 + 1.2 x (8 - 3) = 9 percent.
Common Mistakes
- Using total risk in CAPM instead of beta.
- Forgetting covariance terms in portfolio variance.
- Mixing percentage and decimal input conventions.
Related Guides
- Time-Weighted vs Money-Weighted Return - Compare TWR and MWR with formulas, examples, and CFA Level I interpretation rules.
- CFA Level I Quantitative Methods Formula Sheet - Public formula sheet for CFA Level I quantitative methods calculations.
- CFA Level I Quantitative Methods Calculation Guide - Formulas, examples, and calculator workflows for CFA Level I quantitative methods.