Everything about CFA level I exam

CFA level I exam occurs twice a year – June and December. This post is for those candidates who have already registered for the exam and are looking for the things which they can expect in the exam. If this is your first attempt, then you must know few things before sitting for the actual exam.

• There will be two exams of 3 hours each from 9 AM to 12 PM and 2 PM to 5 PM. If you have never given such exams before (2 exams in a day), then you must consider writing 2-3 full mocks (2 exams in a day) before actually writing the CFA level I exam. The reason behind this is that generally candidates perform well in the morning exam but tend to lose focus in the afternoon exam due to fatigue or other similar reasons.

• It is always better to carry your own watch. You may or may not find the wall clock in the exam room. Cell phones are not allowed in the examination hall.

• Make sure that you reach the examination hall around 1 hour before the exam and have been fed properly and carrying all the necessary things like pencils, passport, prescribed financial calculator and CFA examination hall ticket. Water will be provided inside the examination hall. You will need only 1 copy of examination hall ticket. The invigilators will sign on that ticket in both morning and afternoon exam and you need to preserve it for the afternoon exam after finishing the morning exam. They will finally take that ticket at the end of the afternoon exam.

• You can take extra cells for the financial calculator if you fear that the calculator might stop working in between. However, there will be very few problems where you would be requiring the actual use of the financial calculator. Most of the questions would need very small calculations which could be done without the use of a calculator as well. You need not panic if your calculator stops working in between the exam and you don’t have the extra cells or calculator. Panic will cause more harm than the absence of calculator.

• The 2 hours gap between the exams is never 2 hours long. The invigilators generally consume 20-30 minutes in collecting the papers and making sure that all the candidates have filled the required details properly on the answer sheet. You again have to be in the hall again around 15-20 minutes before the exam. So, the total time you can spend on any activity between the exams is around 60-75 minutes. So, if you are planning to revise some formulas or visit some nearby restaurant for lunch, you should be careful about the timings. It is always better to bring some food with you because the nearby restaurants might be full of other CFA candidates. The food/liquid (chocolates/energy drink) that provides a good amount of energy can be a good thing to consume.

• Whenever invigilators ask you to stop, you must stop. You must close your questions booklets and answer sheet and must not touch your pencil till the collection of your paper by an invigilator. There have been too many cases where candidates have suffered because of not stopping. It is always a better practice to fill the ovals in the answer sheet as you move along rather than filling all ovals at the end of the paper. Try to finish paper 10-15 minutes before the actual time so that you can recheck your answer sheet whether you have filled everything properly or not. Since there is no negative marking in the exam, you must attempt all the questions.

• Do not look into the answer sheet of other candidates. If caught then there could be serious repercussions and also there is more than 60% probability that the other candidate would fail the exam.

• There is a good probability that you might meet few friends in between the exam break or before the start of the morning exam. It is always better if you don’t meet them before the end of both exams. You may lose focus on meeting them. Your full concentration should be on the exam only.

Exam Preparation

How much time should I devote to preparation for CFA level I exam? This is the most commonly asked question by the candidates preparing for the exam. The answer depends on your background, your IQ level, your familiarity with the topics and your focus while studying. There is no unique answer for it. But if you are still looking for the exact time required, then it is 332 hours, 37 minutes and 28 seconds. Those 28 seconds are very important and can be decisive in the final result.

From where should I study – CFA curriculum books or third party content providers’ notes? There are advantages and disadvantages in following either of the above. CFA curriculum books will consume a lot of time as they have explained everything in detail and sometimes have even provided additional readings which are not required for the exam. While doing revision from the curriculum books, it will take a good amount of time. In case you are preparing from the curriculum books, you must prepare your own notes so that you can finish the revision soon. On the other hand, the third party content providers have compressed the readings to half or even lesser. You can finish the course soon, but they generally tend to miss few areas (5-10%) which could be asked in the exam although those areas are not that important for the exam point of view. But still, there is always some risk. It is recommended to read Ethics from curriculum books.

How many questions should I practice and from where should I attempt those? This is also one of the favorite questions of the candidates. It also depends on the candidate. Some candidates have passed the exam by practicing only 500 questions while many others have failed even after practicing around 3,000 questions. However, it is recommended that you try to practice at least 1,500 questions i.e. on an average 25 questions per reading. If you are not scoring 80% marks in those questions, you should go for more questions till your accuracy level increases to 80%. The best source for practicing questions is CFA curriculum books. The problems at the end of the chapters are the best in the quality and are very relevant too. You will find around 1,000-1,500 questions from the CFA curriculum books. Even if you are preparing from some third party content provider, you must solve the end of chapter problems from the CFA curriculum books. Apart from solving those problems, you must also go through the blue-box examples given in the curriculum books. When you are done with those problems and still feel the need to practice more, then you should practice problems from the previous years’ mock exams provided by the CFA Institute. Only 1 mock test is available to the CFA candidates, but you can get previous years’ exam from some other sources. You can even buy question bank from some third party content provider to boost your practice. But those questions should be practiced only after you have finished all the questions from the CFA curriculum books.

How should I go about the preparation? Which subjects should be studied first and which should be studied later? The CFA curriculum books are the best answer for this question. They have structured their book number so that you just need to follow the same chronology and you will do well. If we look at the book 1 from the curriculum books, it contains two subjects – Ethical and Professional Standards and Quantitative Methods. Book 2 contains Economics. Book 3 contains Financial Reporting and Analysis. Book 4 contains Corporate Finance and Portfolio Management. Book 5 contains Equity and Fixed Income. Book 6 contains Derivatives and Alternative Investments.

They have put Quantitative Methods in the first book for a reason. You will be studying about discounting and present value concept from that subject which is the backbone for almost all the calculations in other subjects. So, you must do that topic first and then can take any other subject after that. However, it is advisable that you do understand the Financial Reporting and Analysis as well before moving to other subjects related to finance because that would make things easier to comprehend. Rest all subjects can be studied as per your liking.

Ethical and Professional Standards (36 questions – 15.00% weight)

Ethical and Professional Standard or Ethics is second most heavily weighted subject after Financial Reporting and Analysis. It is even more important because of Ethics Adjustment. If you think that you have always been ethical in your life and that would help you in scoring good marks, then you’re thinking wrong. The ethics dictated by CFA Institute can be very different from your personal moral, ethical standards. For example, many guys might think that insider trading is a victimless crime and also makes markets more informational efficient but according to CFA Ethical Standards, it is a violation. Also, you don’t have to be ethical to score good marks in ethics. 🙂 All you need to do is to study this subject from the curriculum books and try to understand in depth about the treatment of seven Standards of Professional Conduct. Most of the questions will be asked from these seven standards. Only 4-5 questions will be asked from GIPS. There will be few one liner questions as well. You need to know this subject inside-out.  So, you must practice enough questions to get an idea of every type of questions that can be asked in the exam. It is also the subject which has the best ratio of questions asked per page of the curriculum.

Quantitative Methods (28 questions – 11.66% weight)

This subject contains 8 readings. The first two readings dealt with the time value of money and discounted cash flow applications. These readings are not only important for the exam point of view but also for the understanding of other areas like equity valuation or fixed income valuation. Then we have chapters on statistics, probability, and probability distribution. Sampling and Hypothesis are two other topics, and it ends with Technical Analysis. For the exam point of view, the first 6 chapters are very important. In the past, there have been very few questions asked from the last two chapters (around 2-4 only). So, you can focus accordingly. The sampling chapter is very important. The important topics are Confidence Intervals, Continuous distribution, Normal distribution, Statistical measures and various kinds of yields. This is the topic for which you will require financial calculator the most. Proper practice with a financial calculator is required to ace this subject. Understanding is more important rather than just finishing the subject. If this subject is understood well, you even do not need to revise it again. That’s the beauty of this subject. You must familiarize yourself with the working of the financial calculator and should be very careful while solving the problems. If you end up making one mistake, there is a good probability that you will find that answer as an option in the options for the question. Clearing the TVM memory is very important before solving any question and you must be additional careful for solving questions related to an annuity.

Economics (24 questions – 10.00% weight)

Economics is a very specialized discipline. Murray Rothbard was correct when he said – “It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” Most of the mainstream economists get it wrong. That’s the main reason that CFA Institute keeps on changing the syllabus of Economics every now and then. Most of the macroeconomics does not make sense at all. But we should not think too much while preparing for the exam. Just take it as the face value whatever is given in the curriculum books and try to solve the problems using the curriculum content only. The worst thing about it is that it has the worst ratio of questions asked per page of the content. So, one need to study a lot to get the questions correct. The dividend from studying this subject is very low. But still, we can’t leave 10% part of the exam. It has 9 readings. First 4 readings deal with microeconomics, next 3 reading deal with macroeconomics and the last 2 readings are for international trade and currency exchange. Students find first 4 chapters and last 2 chapters manageable as those readings make some sense. But they generally find the chapters related to macroeconomics a little tough. But the good thing is that in the exam, most of the questions would be asked from the first 4 chapters. You should be perfect in first 4 chapters and should be decent in rest 5 chapters to excel in this subject. It will also become boring to finish all the 9 readings in one go. So, you can mix few readings with other subjects to maintain the right amount of concentration and focus.

Financial Reporting and Analysis (48 questions – 20.00% weight)

This subject has the maximum weight in the exam. It is imperative to score well in this subject. It has 14 readings. The first 3 readings give an introduction to the subject. The next 4 readings form the core of the subject discussing income statement, balance sheet, cash flow statements and financial analysis techniques using various ratios. The next 4 readings discuss the important part of financial statements in details like inventories, long-lived assets, income taxes, and non-current liabilities. The last 3 readings evaluate the quality of financial reporting and financial statements. These readings are very interesting. Every reading teaches a new thing, and it is very important to understand everything in detail because these readings will also help you as an analyst in future. For the exam point of view, the readings discussing the income statement, balance sheet, and cash flow statements are the most important readings, and you will find around 20-25 questions from those 3 readings. There will be 6-8 questions from first 3 readings as well. Generally, candidates who do not have prior knowledge of financial statements, find the readings related to income taxes and non-current liabilities little difficult. But the good thing is that these readings are not that important from the exam point of view. You will find only 1-2 questions from income taxes and only 2-4 questions from non-current liabilities. To excel in this subject, our focus should be ob first 7 readings which will comprise around 70% of the questions. The income statement chapter is the most important chapter, and after that the cash flow statements chapter is important. One strategy could be to study first 7 chapters in the first reading. Then study some other subjects and then come back to this subject again and finish the rest 7 readings along with the revision of first 6 readings.

Corporate Finance (17 questions – 7.08%)

Corporate Finance deals with the decision of corporate in raising capital and using that capital. This is very interesting subject, and almost all candidates love reading this subject. It is highly conceptual as well. If you are good with Quantitative Methods and Financial Reporting and Analysis, then this subject will be a cakewalk for you as it is nothing but the application of concepts learned in those subjects. It has 6 readings which can be finished at a much quicker speed. The first two reading deals with capital budgeting and cost of capital and most of the questions will be asked from these two readings only. Capital budgeting involves the concepts learned in Quantitative Methods like NPV, IRR and some other methods of decision making like payback period, etc. Cost of capital is an important chapter which deals with the cost of debt, the cost of equity, the cost of preferred equity etc. This chapter will help us in Equity subject as well. Then we have readings on measures of leverage and dividends and share repurchase which is very interesting and easy readings. The last 2 readings are on working capital management and corporate governance. Very few questions (1 or 2) are asked from corporate governance reading. But the reading related to working capital management is very important and highly conceptual as well. It is advisable to study this reading from the curriculum book to understand the process in detail. If you are good with NPV/IRR calculations and can understand the concepts well, you can ace this reading and can score almost perfect marks.

Portfolio Management (17 questions – 7.08%)

This subject contains 4 readings, and the candidates who are good with mathematics can finish this subject very quickly. The important areas are the interpretation of various lines like CML, CAL, and SML. Candidates should know everything in detail about those lines like the x-axis and y-axis for those lines and the importance of slope of those lines and what do these lines suggest etc. The candidate must also understand how diversification helps in bringing the risk of a portfolio down and how efficient portfolios are formed and selected. The calculations related to the variance of a portfolio and CAPM are also important. The last reading is about IPS (Investment Policy Statement) which will be tested heavily in CFA level III but not that much in CFA level I.

Equity (24 questions – 10.00%)

Equity subject is one of the easiest subjects to ace. It is mostly theoretical subject related to the equity market, and the concepts are very simple to understand. It has only 6 readings, and 10% weight is good for those 6 readings. One should focus more on this subject and try to score closer to 90% marks in it to boost the overall score. All you need to do is to read the topics from the book and practice enough number of questions. There will be so many small details to remember, but you have to do that to score well in this subject. The first reading is about market organization and structure. Second reading is about security market indices, and you must know the difference between different indices and the advantages and disadvantages of using different indices. The third reading is about market efficiency and in all probability; you will find questions related to the forms of market efficiency in the exam. The 4th and 5th readings deal with an overview of equity securities and introduction to company and industry analysis. These readings are very simple and mostly theoretical. The last reading is about the equity valuation which will form the basis for the equity valuation in CFA level II exam. This reading is mostly about discounting and the candidates good with the discounting calculation, find it relatively easy and highly scoring.

Fixed Income (24 questions – 10.00%)

This is one of the most conceptual topics from the CFA level I curriculum. It has 6 readings. The first two readings are theoretical and cover the basics of the different types of fixed income securities and what all players issue those securities and how they are issued and traded in the market. Although it is a very simple area, you need to spend a decent amount of time to understand different types of securities. Try to do all the examples from the curriculum books to have a solid understanding of these topics. Next topic is about the valuation of fixed income securities and covers the analytic behind the valuation of bonds. If you are strong in understanding the concept of the time value of money calculation, this reading will be easier to master. The next reading is about the asset-backed securities. Study it slowly to absorb the process of securitization, SPV, and asset-backed securities. Only basics of these things have been covered in CFA level I curriculum. The next chapter is about risk factors in fixed income securities and talks about duration and convexity approaches. This chapter is the most conceptual chapter of level I curriculum. Spend enough time on this to understand it completely. The last reading is about credit analysis and how rating agencies provide ratings to fixed income securities. It is another theoretical and interesting reading.

Derivatives (12 questions – 5.00%)

Many candidates find this reading relatively difficult as compared to other subjects. This subject is highly conceptual. It has 6 readings. The first reading talks about various derivative instruments and is just an introduction to the topics. The next 4 readings form the core of the subject and cover forwards, futures, options, and swaps. Almost all the questions will be asked from these 4 readings. The last reading is about few options strategies and risk management, and it is interesting reading. The reading related to Options is very important and is highly testable as well. One should practice enough questions to remember all the concepts. If you have any interest in jobs related to trading desks, you must be very good in this area. Following derivative markets along with studying will definitely help in better understanding. For more understanding of the areas, one can always refer the Bible of derivatives- the book by John C. Hull.

Alternative Investments (10 questions – 4.166%)

This is the last subject, and it has the least weight in the exam. But still one must not leave this subject because it has only 1 reading and the reading is relatively small for the 4.166% weight.   The reading is mostly theoretical but interesting as well. One complete reading and one revision will be enough to answer 8-9 correct questions out of total 10 questions.

Passing Score

There are no such clear cut passing percentage marks as they change the MPS (minimum passing score) every year depending upon the toughness level of the exam. Historically, it has always been below 70%. It generally falls between 60-70%. A score of 70% will most likely end up as a passing score.
You do not need to score more than 50% in all the subjects. If your overall total score is above the MPS, then you will pass the exam even if your score in few subjects is zero. However, there is an Ethics adjustment in case your score is on the borderline. If your score is on the borderline, they will look at your score in Ethics, and that score will be given more weight in the final assessment.


The result will be announced after 6-8 weeks from the exam date, and it will be announced on Tuesday. The pass percentage has been around 38% in recent few years. But you should not concentrate on pass percentage. Your focus should be on getting more than 70% marks in the exam. That will certainly cross you over the passing line. The period of 6-8 weeks is a good amount of time, and it is very important for the candidates who have written exam in December to prepare for the June level II exam as that exam preparation would require a good amount of time. You can read this post to know what to do after December CFA level I exam. Wish you all the best for the exam.

You can download our sample tests for Financial Reporting and Analysis, Fixed Income, and Quantitative Methods from here.



6 thoughts on “Everything about CFA level I exam

  1. franck October 2, 2013 at 2:23 pm Reply

    thank you ,this information is very strategic for CFA success

  2. khoaimi February 8, 2014 at 8:39 pm Reply

    Thanks for the article.

  3. Krish July 31, 2014 at 6:36 am Reply

    Of all the blogs and websites i came across briefing about cfa, this one was truly the best…many thanks for enlighting me…

  4. […] To know more about CFA level I exam, you can go through this post. […]

  5. […] Source: https://konvexity.wordpress.com/2013/09/16/everything-about-cfa-level-i-exam/ […]

  6. Joe Naz February 17, 2015 at 5:09 am Reply

    Is it just me or do you hate the FR&A the sessions drag on forever I am retaking after studying 150 hours and failing the Lvl 1. I am spending more time on this book and starting here as the other books can be covered faster. I do have a math and a finance degree but find so many accounting rules gaap vs. ifrs cumbersome. I guess this is what the CFA is all about in many regards.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s


A blog of the NYU Colloquium on Market Institutions and the Leipzig Colloquium on the Market Order

Fundoo Professor

Thoughts of a teacher & practitioner of value investing and behavioral economics

%d bloggers like this: