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New invesment formula sheet for CFP, Cheat Sheet of Financial Accounting

Newbridge CollegeFinancial Accounting

Formulas sheet with arithmetic and geometric means, holding period return, tax equivalent yield, effective annual rate of return and unbiased expectations theories.

Typology: Cheat Sheet

2021/2022

Uploaded on 02/07/2022

amlay
amlay 🇺🇸

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| 1 2/4/16 P a g e
New Investment Formula Sheet for CFP Exam
CFP Board has recently updated its Investment Formulas sheet, which is provided to candidates taking the CFP
Exam. The table below outlines the changes to the sheet.
Formulas Added
Formulas Removed
Arithmetic Mean
Conversion Value of a Convertible Bond
Geometric Mean
Holding Period Return
Tax Equivalent Yield
Effective Annual Rate of Return
Unbiased Expectations Theory
The new formulas are listed below with an explanation of each variable. The location of content
supporting these formulas in the 2016 EPR Book 3 Investment Planning and the 2016 Course 101
Textbook is also provided.
Arithmetic Mean
2016 EPR Book 3, Page 76; 2016 Course 103 Textbook, Page 101
AM = arithmetic mean
a = rate of return for given period
n = number of periods
Geometric Mean
2016 EPR Book 3, Page 76; 2016 Course 103 Textbook, Page 102
n = number of periods
r = rate of return for given period
pf3
pf4

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Download New invesment formula sheet for CFP and more Cheat Sheet Financial Accounting in PDF only on Docsity!

P a g e| 1 2/4/

New Investment Formula Sheet for CFP ^ Exam

CFP Board has recently updated its Investment Formulas sheet, which is provided to candidates taking the CFP Exam. The table below outlines the changes to the sheet.

Formulas Added Formulas Removed Arithmetic Mean Conversion Value of a Convertible Bond Geometric Mean Holding Period Return Tax Equivalent Yield Effective Annual Rate of Return Unbiased Expectations Theory

The new formulas are listed below with an explanation of each variable. The location of content supporting these formulas in the 2016 EPR Book 3 Investment Planning and the 2016 Course 101 Textbook is also provided.

Arithmetic Mean 2016 EPR Book 3, Page 76 ; 2016 Course 10 3 Textbook, Page 101

AM = arithmetic mean a = rate of return for given period n = number of periods

Geometric Mean 2016 EPR Book 3, Page 76 ; 2016 Course 103 Textbook, Page 102

n = number of periods r = rate of return for given period

P a g e| 2 2/4/

Holding Period Return 2016 EPR Book 3, Page 7 4 ; 2016 Course 103 Textbook, Page 107

HPR = holding period return r = rate of return for given period n = number of periods

Taxable Equivalent Yield 2016 EPR Book 3, Page 12 ; 2016 Course 103 Textbook, Page 110

TEY = taxable equivalent yield r = nominal rate of return t = tax rate (as a decimal)

Effective Annual Rate of Return 2016 EPR Book 3, Page 79 ; 2016 Course 103 Textbook, Page 105

EAR = effective annual return i = interest rate n = number of periods

Unbiased Expectations Theory 2016 Book 3, Page 110 ; 2016 Course 103 Textbook, Page 145

1 RN = rate of return for period^ N N = number of periods 1 R 1 = interest rate for period 1 E ( 2 r 1 ) = expected interest rate for period 2 E ( Nr 1 ) = expected interest rate for given period

Provided Formulas (cont.)

p

p f p

r r S σ

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