Tag Archives: CFA exam results

How to avoid failing the level 2 CFA exam

Unfortunately, I am not writing this from the perspective of someone who passed the level 2 CFA exam on their first attempt. Recently, I got news that I failed level 2 (June 2009) and have decided to write down some tips for those who are considering attempting the level 2 CFA exam.

To explain how I approached the exam, I really begun studying with about 5 weeks to go and put in a solid 10-15 hours a week (my friends still recall missing me) until the last week when I put in around 35 hours. I watched each of the Schweser videos and made my own personal notes of most of the areas of the course (at least the parts that didn’t totally bore me to death – we’ll get to those later). I did not read the CFAI material or the Schweser notes. In total, I did all the CFAI practice exam questions and a few other select questions for a total of around 200 questions. Whilst I knew this was less than recommended, I was focusing on learning the information myself and hoping an understanding of it (rather than a drummed in repetition effect) would get me through.

This amounted to far less than the CFAI recommended 300+ hours but I thought I stood a somewhat decent chance of passing the exam with this amount of study regardless. This belief was based on my performance in level 1 with a similar amount of work. Additionally, I was learning the information because I was interested in it and found some sections of derivatives, portfolio management and alternative investments particularly hard to find the motivation to study – as they don’t particularly interest me. Though I did find the ICAPM model particularly humourous.

Obviously I was proven wrong; though narrowly. I performed well in the areas I was most interested in (equity valuation, financial statement analysis, and economics; average in ethics (a dart may have assisted me here) corporate finance and alternative investments; and poorly in derivatives, portfolio management and bonds. Of particular interest, my punt not to learn swaps particularly backfired. Bad punt.

The exam itself was difficult for me for two reasons. Firstly, I felt they left out alot of what I see to be the more useful ‘big’ parts of each different section (except those I mentioned that I didn’t focus on). Instead of these areas, they focused on details from the depths of the CFAI curriculum (this, I was obviously underprepared for).

Secondly, to an even greater extent than in level 1, the questions were particularly well written to confuse the living hell out of you. I have no issue with testing in this way as it obviously awards attention to detail. When thinking about several questions after the exam and comparing my response to those being discussed on analyst forum, I realised that i in fact had the correct answer figured out but was misled by the wording in the question to record a different answer. Hypothetical E.g. “Which of the following is not likely to be greater than the ROE of company A?” – here I would miss the “not” or do something stupid like that.

Overall, I feel very happy that I completed the level 2 CFA exam and learned alot from it. In particular, I enjoyed the debt vs equity financing material, the competitive forces material, the aggressive vs conservative accounting material (save the pension accounting), all the equity valuation material, the balance of payments, import / export and the foreign exchange material.

I may have another go at the exam but I feel I have got most of what I want out of the level 2 CFA material. Completing it would just allow me to do level 3 which I have heard is 50% portfolio management (not something i’m sure I could handle). As stated from the beginning of my CFA quest, the plan was to learn the information I wanted to and give myself a deadline, not lock myself in the portfolio delusion, i mean management, gaol. So we’ll see what happens next June.

In terms of tips for those completing the level 2 CFA exam:

  • The minute details matter, nothing is sacred. They are more than content to not test massive sections of the course and instead quiz you on the common name for a random bond that you’ll never have any contact with.
  • A very solid understanding of every section is required – don’t take punts by leaving out sections if you want to be sure to pass.
  • I imagine that lots of practice would have improved my chances (rather than just learning).
  • Do practice questions that involve word and syntax tricks under exam conditions.

CFA Level One Results and Exam Day Reflections – December 2008

December 7th 2008:

2:37am – After finally getting to sleep approximately 7 and a half hours before the Level One CFA examination was set to begin in Sydney, I received a phone call from a good friend of mine asking me to meet him at bar nearby. It’s saturday night and for the fourth weekend in a row, I am unable to agree to his request. The CFA preparation process had been grueling and I had not put in anywhere near the recommended 250 hours. But somehow I felt I had come as far as I could have – 2 weeks of solid study had blended the 18 study session curriculum into some sort of continuum of finance knowledge – in short, I felt I was ready.

6:30am – Having managed to get some level of sleep (I dont believe it was of the REM kind), my mind is mapping out the day ahead. I’d been thinking about this day for at least the last week and despite not being as prepared as I may have dreamt, I couldn’t wait for it to be over. Cook and eat breakfast, follow instructions on the list that I had magnetised to my fridge – “can of tuna, apples, pencils, calculator, eraser, etc..”, get in pre-ordered taxi to the exam and pass. How hard could it be?

7:55am – Other than waiting in a line for 10 minutes to go to the overpopulated toilet, things have gone smoothly thus far. I am outside the venue, frantically reading over my CFA in two pages cheat sheet, and hoping that the 9 hours ahead of me passes me by as quickly as possible. Interestingly, having completed two other degrees, I had probably put in the most study that I ever have for one exam. More interestly, save for the dark depths of administrative law, I also felt that despite this fact I had the greatest chance of failure in any one exam that i’ve ever done. The weight of the course materials is perhaps greater thanmost people realise and is siply exhausting to try and learn in a shot amount of time without prior knowledge or working experience.

10:00am – One hour into the paper, I have completed around 75 of the 120 questions. I am well ahead of time. At this stage my reflections on the paper are that it is far more qualitative than I had believed it would be. I have probably used my calculator 4 or 5 times by this point. Knowing the intracacies of each study session (at many points including trivia-esque details) has been required many a time to narrow the answer down from 2 options to the correct one. The CFA Institute seems to believe that instead of asking two questions, they will ask two questions in the form of one question (see made up question below):

In periods of rising prices, inventory will least likely be overstated and COGS will be maximised when:

a) LIFO is used for both purposes

b) LIFO is used and FIFO is used respectively

c) FIFO is used for both purposes

d) FIFO is used and LIFO is used respectively

1:00pm – I managed to get a small amount of study done during the break on areas that were not tested heavily during the morning session. I also ate my prepared can of tuna (gourmet I know) so that I didn’t fall asleep in the afternoon session. I decided it was smart not to arrive at the exam when they said to in the afternoon (1 hour early) and returned with about 15 minutes before the next exam was due to start. I was feeling very confident at this point.

3:30pm – Thank you CFA for making me feel so confident – why could you not have been so kind in the afternoon? Like some crual set-up, sometime around 60% through the afternoon exam session, I was just about ready to committ exam suicide. I felt it was a very tough afternoon paper and often I found myself down to a choice between two options in one question (which was really two questions). I was usually sure of one answer out of the two you needed to know to get the answer correct and close to sure about the second. I estimate that I got a maximum of 24 questions wrong in the morning paper compared to around 45 in the afternoon paper. With 40 or so questions to go, I remember feeling absolutely drained (180 questions in) and thoroughly ready to go home and relax my brain. No such luck.

6:00pm – Overall, I’d say the paper was far less quantitative than I may have hoped or planned. I was ready to calculate the depreciation in year 27 of a 40 year capital lease and instead I was instructed to do unexpected things.  All I can say about my experience in level one is know the concepts, know them in detail and be very sure about everything. The CFA Institute has a way of making you doubt even the most concrete parts of your knowledge. How well do you know what you think you know? Do firms really need to lodge a statement of changes in owners equity under US GAAP or is it optional – their questions will test knowledge qualitatively and you must be ready if you wish to have a chance. I don’t believe time was a problem at all but I did do 2 practice quizes timing myself accurately (less than the ~10-15 I heard others doing). Overall I completed a breakdown of how I think I went and even in my most conservative assessment where I got all the 66 questions I checked as possibly wrong wrong, I still got greater than the 70% that is needed to pass. Here’s hoping but the fatigue of it all may have messed up my assessment.

2:01am Thursday 29th of January – Results have just been released (later due to the time difference in Australia). My study has paid off and I passed level 1 of the CFA program. Not sure what happened to my corporate finance results but beggars can’t be choosers I guess…

My results in the difference sections are below: