The CFA™ examinations are very comprehensive, difficult, time-pressured and exhausting. The key to successfully passing the examinations is preparation. You should expect to devote a minimum of between 250 and 300 hours to prepare for each examination and plan on beginning your preparation no later than between 4 and 6 months before your exam. Since most candidates do not pass their CFA examinations the first time, it is critical to know how to prepare, where to focus and that you have the support you need to succeed. To that end, the Stalla team and the CFA Society of Chicago have provided some basic review strategy tips and reminders for you below.

About the Exams

Each of the three CFA Exams is six hours in length, equally divided into a morning and afternoon session. Each session is a self-contained unit: i.e., one cannot answer morning session questions in the afternoon.

The 2009 Level I CFA^® exam focuses on the tools and inputs relating to investment valuation and portfolio management. It also introduces basic concepts regarding securities laws, regulations, and ethical and professional conduct. The emphasis here is on knowledge and comprehension. The exam consists of 240 multiple-choice questions, each of which is worth 1.5 minutes (or points). This should be considered an average time allotment, as some questions will take longer, while others will require less time. A perfect exam score is 360 points. 

Although some of the Level I exam’s 240 questions are more complicated than others and may take longer to read and answer, for grading purposes all questions are assigned the same weight. You don’t lose points for wrong answers. Your score is based simply on the percentage of total questions you answer correctly.

At Level I, the exams are completely machine-graded. Using forms provided at the exam site, you answer questions by filling in ovals, marked “a,” “b,” and “c” corresponding to the three possible multiple choice answers. As some of you may know, this is a change from previous years, when there were four answer options rather than three.  For the machines to properly record your answers, you must fill in the ovals completely using a No. 2 or HB pencil. Sounds basic, but candidates have failed because they didn’t fill in the ovals completely or failed to use the proper writing instrument.

The minimum score required to pass the CFA Exam is set every year by CFA Institute Board of Governors. The standards used by the Board to determine this minimum passing score are not fully disclosed. However, the percentage of candidates who pass or fail in a given year is not the primary factor in making this determination. Rather, the difficulty of the exam questions and the importance of subjects to the work of investment professionals are believed to be most critical in setting the minimum passing score for any given exam.

Keep in mind that no candidate scoring above 70 percent on a CFA Exam has ever failed. Therefore, answering 168 out of 240 correctly is typically enough to pass. Stated another way, you can afford to miss as many as 72 questions and still be well within the minimum historical passing score!

Download sample multiple choice questions provided by CFA Institute

The 2009 Level II CFA^® exam emphasizes asset valuation while testing your ability to apply concepts at Level I relating to investment analysis, valuation, and ethical and professional conduct. The focus here is on analysis and application.

The Level II exam consists of 120 questions formatted as item sets, which are essentially cases or vignettes (between one and two pages long) followed by six multiple-choice questions relating to the vignette. Each session consists of ten item sets for a total of 60 multiple-choice questions. The broad topic areas covered in the afternoon session will generally be the same ones covered in the morning, with one or two item set exceptions. At Level II, you will have approximately three minutes on average to answer each multiple-choice question, including reading the vignette..  As with Level I, you will be required to have a firm grasp of how to apply the CFA Institute Code of Ethics and Standards of Professional Conduct in organizations, and you should also know how to apply the concepts you learned at Level 1.

The minimum score required to pass the Level II CFA Exam is set every year by CFA Institute’s Board of Governors. The standards used by the Board to determine this minimum passing score are not fully disclosed. However, the percentage of candidates who pass or fail in a given year is not the primary factor in making this determination. Rather, the difficulty of the exam questions and the importance of subjects to the work of investment professionals are believed to be most critical in setting the minimum passing score for any given exam.

Keep in mind no candidate scoring above 70 percent on a CFA Exam has ever failed. Therefore, answering 84 out of 120 correctly is typically enough to pass. Stated another way, you can afford to miss as many as 36 questions and still be well within the historical minimum passing score!

Download a sample item set provided by CFA Institute 
 

The Level III CFA^® exam is an in-depth review of the entire portfolio management process, and requires that you demonstrate a working knowledge of the process, including the application of concepts learned in the preceding exam levels. As with Levels I and II, you must have a firm grasp of how to apply the CFA Institute Code of Ethics and Standards of Professional Conduct in Organizations. The focus here is on synthesis and integration.

The 2009 Level III exam consists of 12 to 15 constructed response (essay) questions in the morning session and 10 six-question item sets (60 questions in total) in the afternoon session. The essay portion of the exam will typically include at least two rather lengthy questions related managing portfolios for institutional and individual investors.  Essay questions may take a variety of forms, including calculations, short answers or templates. Calculations require candidates to simply apply the appropriate formula to solve a specific problem. Short answers may require selecting "yes or no" answers to specific questions, then writing several sentences to support the candidate's answer. Templates are often partially completed tables that require candidates to complete them by entering the missing information. (Note: Make sure to check if a template has been provided, as answers written outside the template will not be graded). As with Levels I and II, you will be required to have a firm grasp of prior exam concepts and how to apply the CFA Institute Code of Ethics and Standards of Professional Conduct in organizations.

Download a sample item set and essay questions provided by the CFA Institute.

Topic Weightings

Not all topics are given equal weight at each level of the CFA Exam. Although variations exist from year to year, and the categorization of multi-faceted problems are open to some interpretation, Stalla's estimate of the relative importance of the different topical areas for the different levels of the CFA Exam is as follows:

Primary Topic	Est. % Level I	Est. % Level II	Est. % Level III
Ethical and Professional Standards	15%	10%	10%
Investment Tools:
Quantitative Methods	12	5-10	0
Economics	10	5-10	0
Financial Reporting & Analysis	20	15-25	0
Corporate Finance	8	5-15	0
Portfolio Mgt. & Wealth Planning	5	5-15	45-55%
Asset Valuation:
Equity Investments	10	20-30	5-15
Fixed Income Investments	12	5-15	10-20
Derivatives	5	5-15	5-15
Alternative Investments	3	3-15	5-15
	100%	100%	100%

THE GAME PLAN

Develop a Study Plan. The first step in starting your quest for the CFA charter is to develop a detailed study plan. There is a great deal of material to be mastered in a relatively short amount of time, so organizing your efforts is a critical success factor. When developing a study plan, it is important to keep in mind that the unexpected often disrupts our original intentions. Therefore, it is also important to periodically review and adjust your study plan so that course corrections and intelligent compromises can be made when appropriate. The scope of the exam and the sheer volume of material can seem overwhelming, but setting up a sound study plan at the beginning and making reasonable adjustments as you progress will help mitigate much of the stress.

Structure your Preparation. The most successful learning system is a structured weekly regimen of study that integrates theory, practice, application and review. In addition to ongoing weekly reading and "homework" practice, some form of periodic progress testing should be incorporated into your preparation strategy so that topics learned early in the study program are not forgotten by the exam date. If you are studying on your own, re-visiting the LOS's is an excellent way to perform such cumulative reviews.

Take notes. In addition to relying on integrated review or study programs, many candidates find highlighting passages, taking notesor making note cards to be effective techniques in preparing for the exam. All candidates are encouraged to construct their own reading notes to enhance retention and to provide a convenient source for final review. Whatever method is employed, a cumulative review of the LOS's covered through each week plus cumulative progressive practice examinations is recommended so that subjects studied in weeks past will not be forgotten by the exam date.

Finish Early. Several weeks before your exam, you should plan on completing your readings and practice, and identify a final review strategy that enables you to assess your progress to date, drill on practice examination questions, review your notes and bring it all together. A thorough review of Ethical and Professional Standards should be undertaken in the final week before the exam. (Note: The CFA Institute considers this to be an essential part of the program. Candidates with "borderline" exam scores will not be given the benefit of the doubt if they fall to pass the Ethics section of the exam).
 

Taking the Exam: Tips and Tactics

Remember "40/50/10"

As a general guideline, Stalla recommends a 40/50/10 model of preparation to answer a combination of basic, moderately difficult, and very difficult questions. Although the proportions are only estimates, our candidates tell us that they are helpful gauges for preparation.

40 percent fundamental concepts

Expect about 40 percent of the exam questions to be relatively straightforward. These should be readily answered if you understand the most basic principles and can do the most basic calculations found in the assigned readings.

50 percent moderately difficult

Prepare for about 50 percent of the questions to be more challenging. They will require an in-depth understanding of the subject matter, the ability to solve more complicated problems, and a demonstration that you paid detailed attention to the assigned readings.

10 percent very difficult

Prepare for the remainder of the questions, about 10 percent, to be very difficult, requiring you to make proper inferences from basic principles found in the assigned readings. You will need to exhibit good analytical skills by solving problems that may not have been directly encountered in the readings, but which are solvable by using the principles learned in the right way. You may encounter obscure trivia, but for the most part, there is no attempt to pose “trick” questions.

Manage your time wisely

Bearing in mind the 40/50/10 model, we recommend that you approach the exam in two or three passes. 

On the first pass, rack up as many points as possible as quickly as you can. Answer only those questions that you find easy and feel you can answer in one minute or less. Skip long questions or those with less readily apparent answers or solution methods. If you can answer the easier questions in half or two-thirds their allotted time, with 85 to 90 percent accuracy, you can compile almost three-quarters of the points required to pass the exam and still have one-half to one-third of the total test time still available! This gives you a big advantage.

On the second pass, answer the “somewhat difficult” questions and the easier ones that took too long to answer during the first pass. You want to get 60 to 75 percent of these more difficult questions correct. You should have “banked” some time during the first pass, so you have more time to spend on these more difficult or lengthy questions. You still must go fast enough to answer all questions before the exam session ends. So, don’t spend too much time on a single question. Just use your best judgment and move on!

On the third pass, make sure that you’ve recorded an answer for every question on the exam. Leave no answer blank.

Read the questions carefully

Reading a question too quickly or scanning it in the interests of time could cause you to misinterpret it or jump to the wrong conclusion and give the wrong answer. Despite the time pressure, read slowly enough to make sure you understand precisely what each question is asking.  Some questions are long and confusing, because of their wording or because they contain too much information. Sometimes the best plan is to conclude quickly that such a question will take up too much time on the first pass and come back to it on the second.

Answer precisely; there’s only one correct response

The multiple-choice and item set portions of the CFA Exams are machine graded. In these cases, you get no partial credit for using the right methodology to come up with an inaccurate answer. So go slowly enough to be precise and not make careless math errors. Remember this especially on your first pass through the exam. The closer you can get to a perfect score on the easier questions, the higher your odds of passing the exam, no matter how difficult the other questions may be.

Give the answer found in the readings

Answers to CFA Exam questions reflect the assigned readings only. Conflicts with what you possibly believe, what you learned somewhere else, or what you do on the job are to be resolved in favor of what the assigned readings say.

Avoid “over-thinking” questions

Over-thinking questions has been the downfall of many smart candidates. If your solution to a question is highly complex and cumbersome, you are probably off on a tangent. The examiners are trying to assess your knowledge of the subjects covered in the assigned readings, not trying to trick you.  Take the attitude that all questions can be answered in a straightforward manner by applying the principles contained in the readings. Answer questions based on primary rather than secondary or tertiary effects.

Fill in the right oval

This sounds elementary, but it’s extremely important. If you take the exam in two passes, answering the easier questions on the first pass and the harder ones on the second, take great care that the number of the oval you fill in on the answer form corresponds to the number of the question you’re answering. Carelessness here can cost you dearly.

Do Not Try to "Game" the Test. The examiners are fully aware that many candidates try to guess what will be on the exam based on previous exams or the relative importance of the subjects within each primary topical area in the curriculum, and then study only those areas. Do not make this mistake!

Although the percentage of the exam questions that will relate to each primary topic may be fixed by CFA Institute, the exact subjects within each of these primary topics (and their associated Learning Outcome Statements) that will be tested are selected using a stratified random sampling process. The constrained random selection process within the primary topics means that less important subjects within each primary topic have a significant chance (maybe 25%) of being on the exam. In addition, topics that have been heavily emphasized in past exams may be completely ignored on the current exam, while subjects that have not been covered on previous exams may be heavily emphasized.

While effort is made to cover important subjects thoroughly, there is also an effort to make the tests different from year to year so that candidates cannot successfully "game" the exam. Learning Outcome Statements that have been emphasized in past years might not be emphasized this year. There are a sufficient number of readings and sub-topics covered in the CFA Institute Study Guides to ensure that many will be covered on the exam, but others will not. However, there is no way to determine in advance what sub-topics will be covered and which ones will be ignored in any given year. Candidates are advised, therefore, to be thoroughly prepared in all subjects assigned in the study program. Going over past exam questions, to the extent they are available, is recommended for practice in problem-solving, but not as a means of determining the probability that a particular type of question will appear on a given year's examination.

Release the Pressure. The CFA Exam places a lot of pressure on candidates. This pressure is positive when it provides an incentive to study and prepare well. However, pressure can become a negative force on exam day if it leads to anxiety and/or panic that adversely affects one's test-taking efficiency. Therefore, starting one or two weeks before the date of the exam, make a conscious effort to relieve the psychological pressure of the exam itself. In particular, try to reduce the feeling that passing this exam is akin to a "life and death" situation.

Something else that candidates can do to relieve anxiety is to visit the exam site one or two weeks before the exam date. Make sure you know how long it takes to get to the site, where parking is available and the exact location of the exam room. If you can, go into the exam room and get comfortable with the surroundings. Make sure to also check Stalla's and CFA Chicago's websites a few weeks before the exam for free final preparation tips and strategies that will be helpful to you as exam day approaches.

The right attitude

Develop an attitude like Olympic athletes who train for years for one performance. On the scheduled day of the event, they know that just one misstep can mean that all their hard work will be for nothing. Yet, if they dwell too much on that possibility, the likelihood of faltering actually increases.  Athletes cope by realizing that they have trained and practiced countless times, and now all they can do is complete one more exactly as they’ve practiced. The outcome is really out of their hands; it is up to others to judge their performance. They resolve to simply do what they’ve practiced and let the chips fall where they may.

Do the same. Keep reminding yourself that you are as prepared as you possibly can be at this time. The hard work is over, now just go out and perform at your peak. Don’t worry about the outcome; that decision is out of your hands. Truly adopting such an attitude can help reduce “performance anxiety” on exam day, an important part of writing a successful exam.

Remember that the dedication and commitment you devote to exam preparation now will make all the difference to your success.  All of us here at Stalla and CFA Chicago are behind you and wish you the best of success on Exam Day!