calculation-reference

CFA Level I Portfolio Management Calculations

Expected return, portfolio risk, CAPM, Sharpe ratio, and performance measurement calculations.

TL;DR

Portfolio Management calculations combine weighted averages, covariance, diversification, CAPM, risk-adjusted performance, and return attribution.

Formula Reference

Portfolio expected return

E(Rp) = sum[w_i x E(R_i)]

Weighted-average expected return.

CAPM

E(Ri) = Rf + beta_i x [E(Rm) - Rf]

Required return for systematic risk.

Sharpe ratio

Sharpe = (Rp - Rf) / standard deviation

Excess return per unit of total risk.

BA II Plus Keystrokes

Use STO/RCL for weights, returns, and market risk premium.
Use x^2 for variance terms.
Use square root after summing variance to get standard deviation.

Worked Example

Rp = 10 percent, Rf = 3 percent, standard deviation = 14 percent.
Sharpe = (10 - 3) / 14 = 0.50.
Higher Sharpe means more excess return per unit of total risk.

Common Mistakes

Using beta in the Sharpe ratio.
Forgetting covariance in two-asset portfolio variance.
Mixing TWR and MWR interpretation.

Related Guides

CFA Level I Portfolio Management Formula Sheet - Public formula sheet for expected return, variance, CAPM, Sharpe ratio, and performance measurement.
BA II Plus: CAPM Step by Step - Calculate required return with CAPM using BA II Plus arithmetic and memory keys.
Time-Weighted vs Money-Weighted Return - Compare TWR and MWR with formulas, examples, and CFA Level I interpretation rules.