The CFA® exam
“The four most expensive words in the English language are, 'This time it's different.'"
Sir John Templeton
The CFA exam itself is six hours long, divided into two three-hour papers, morning and afternoon. The topics that are covered in the program, and their relative weightings for 2008, are shown in the table below:
| Topic area | Level I | Level II | Level III |
|---|---|---|---|
| Ethical and professional standards | 15% | 10% | 10% |
| Quantitative methods | 12% | 5-10% | 0% |
| Economics | 10% | 5-10% | 0% |
| Financial statement analysis | 20% | 15-25% | 0% |
| Corporate finance | 8% | 5-15% | 0% |
| Equity investments | 10% | 20-30% | 5-15% |
| Fixed income investments | 12% | 5-15% | 10-20% |
| Derivatives | 5% | 5-15% | 5-15% |
| Alternative investments | 3% | 5-15% | 5-15% |
| Portfolio management | 5% | 5-15% | 45-55% |
| Total | 100% | 100% | 100% |
Source: www.cfainstitute.org
Each of these topics is described with Learning Outcome Statements (LOS). These LOS define what knowledge, skills and abilities the candidate is expected to have after mastering the topic. They should not be used as a checklist of “things to know” on that subject – more as target skills to acquire while studying each topic.
Exam style
The exam has a somewhat different style for each level.
The Level I exam consists of 240 multiple choice questions, 120 to be answered in each three-hour paper. Each question tests one or more LOS and requires the candidate to select the most appropriate response from four possible answers. Hence candidates have an average of 90 seconds for each question.
At Level II the exam uses “item sets”: each three-hour paper contains ten vignettes, which consist of some case study information followed by six selected response questions. The candidate has an average of 18 minutes per six-question set, with 120 questions in total over the six hours. An item set can examine a number of different LOS and can include multiple topics within the same vignette.
Level III has two styles. The morning paper contains “constructed response” questions. This is a written paper in which each question component requires the candidate to circle an answer, write a few sentences, show a calculation, explain a statement, and so on. The afternoon paper contains item sets in the same style as Level II.