What is CFA Exam?

What is CFA Exam?

The CFA Exam consists of a series of three examinations (Levels I, II, and III) to be taken successively. Exams are given only once a year in June, except for Level I applicants, who also have the opportunity to take the test in December. The number of times you can take each exam is not limited, and you can spend as much time since you have to pass the exam.

The CFA Level 1 exam consists of basic knowledge and understanding questions based on investment instruments, while the CFA Level 2 examination includes more complex analysis and emphasis on asset valuation. The CFA Level 3 exam incorporates all concepts and analytical methods in several applications for effective portfolio management and capital planning.

Getting Started With CFA Certification

What does CFA stand for?
CFA stands for the Chartered Financial Analyst Program. It is a specialized certification offered globally to investment and financial practitioners by the American-based CFA Institute (formerly the Association for Investment Management and Research or AIMR).

What is the CFA Institute?
The CFA Institute is an international body that provides education to investment and financial practitioners. It also provides investment professionals with a code of ethics to follow and several certification programs they can complete. It is formerly known as the Association for Investment Management and Research (AIMR). Its principal mandate is to set and maintain high standards for the finance industry.

What are all subjects in CFA all levels?
The Learning Outcome Statements (LOS) and the core principles for the CFA exams are based on the Candidate Knowledge Body developed by the CFA Institute. While the material is revised per exam cycle, all three CFA test levels concentrate on the same 10 subject areas. Exam weights differ by standard and may differ slightly year by year. The following subject areas are covered:

Topic Area Exam Weights
Level 1 Level 2 Level 3
Ethical and Professional Standards 15 10-15 10-15
Quantitative Methods 12 5-10 0
Economics 10 5-10 5-15
Financial Reporting and Analysis 20 15-20 0
Corporate Finance 7 5-15 0
Equity Investments 10 15-25 5-15
Fixed Income 10 10-20 10-20
Derivatives 5 5-15 5-15
Alternative Investments 4 5-10 5-15
Portfolio Management 7 5-10 40-55
Total 100 100 100

What opportunities does the CFA have?

Job opportunities following completion of the CFA program are as follows:

  • Portfolio Manager
  • Research Analyst
  • High-Level Investment Executives
  • Investment Banking Analyst
  • Corporate Financial Analyst
  • Investment Strategist
  • Personal Finance Executive
  • Freelance Investment Consultant

CFA Test Structure and Format

Level 1 Level 2 Level 3
Exam Structure 240 multiple choice questions 20–30 vignettes supporting 120 multiple choice questions 20–30 vignettes supporting a variable number of constructed response and multiple choice questions
Exam Duration Morning session: 3 hours; 120 questions

Afternoon session: 3 hours; 120 questions

Morning session: 3 hours; 10–15 vignettes supporting 60 questions

Afternoon session: 3 hours; 10–15 vignettes supporting 60 questions

Morning session: 3 hours; 8–15 vignettes supporting constructed response questions

Afternoon session: 3 hours; 10–15 vignettes supporting 60 multiple choice questions

Question Format Multiple-choice questions Vignette-supported multiple-choice questions Vignette-supported constructed response questions and vignette-supported multiple-choice questions
CFA Results Availability Within 60 days of taking the exam Within 60 days of taking the exam Within 90 days of taking the exam
CFA Pass Rates 43% 45% 56%

CFA Exam Schedule and Registration Dates

Early CFA registration deadline:

  • June 2020 Exam: October 2, 2019
  • December 2020 Level 1 Exam: March 18, 2020

Standard registration deadline:

  • June 2020 Exam: February 12, 2020
  • December 2020 Level 1 Exam: August 19, 2020

Final deadline:

  • June 2020 Exam: March 11, 2020
  • December 2020 Level 1 Exam: September 9, 2020

Examination admission tickets available:

  • June 2020: May 2020
  • December 2020 Level 1 Exam: To be announced

June 2020 Examination Dates:

  • June 6, 2020: Americas (All Levels); EMEA (All Levels); APAC (Level 2 & Level 3)
  • June 7, 2020: APAC (Level 1)

June 2020 Religious Alternate Exam Date:

  • June 7, 2020: Americas and EMEA (All Levels)
  • June 8, 2020: APAC (All Levels)

December 2020 Examination day:

  • December 5, 2020

December 2020 Religious Alternative Date:

  • December 6, 2020

CFA Exam Costs and Registration Fees

Registration fees vary depending as to when you choose to apply for the test, find out more about the CFA fees below.

One-time Enrollment Fee $450 USD
Early Registration Fee $700 USD
Standard Registration Fee $1,000 USD
Late Registration Fee $1,450 USD

Note: For the first time registrants of the Level 1 exam, there is a one-time application fee of USD 450.

CFA Requirements

To become a CFA applicant, you must enroll for the CFA program before you can apply for the Level I test. You must meet all the requirements mentioned below in order to be eligible.

  • Have a U.S. bachelor’s degree or equivalent
    • Or be in the final year of Bachelor’s program at the time of registration.
    • Or have four years of professional, qualified work experience (doesn’t have to be investment-related)
    • Or a combination of job experience and college experience totaling at least four years. Part-time jobs are not eligible, and a minimum of four years must be incurred before enrolment.
  • Meet the criteria for admission to professional conduct (you will be told to sign professional conduct and applicant obligation statements during the application process)
  • Be ready to take the tests in English.
  • Must have a valid International Travel Passport (required for registration and examination)
  • Resides in a participating country

CFA Registration

To become a charterholder is a turning point for many financial professionals and shows a strong understanding of quantitative investment research and real-world portfolio management capabilities. To become a CFA charterholder, you have to:

  1. Pass CFA Examinations – The CFA program consists of three curriculum levels, each with its own test. The completion of the three-level exam is a prerequisite to acquiring a CFA charter.
  2. Achieve Accredited Job experience – Complete work expertise specifications before, during, or after participation in the CFA program. Your experience should be directly involved in the investment choice-making process or in the development of a work product that adds value to that process.
  3. Submit Reference – You will have to provide 2-3 relevant sources to back up your membership application. References will be contacted for comment on your qualifications and work experience.
  4. Register to be a Charterholder – Register to be a regular member of the CFA Institute. When your registration has been accepted, and you have joined the CFA Institute, you will have received the CFA Charter.

CFA Scoring System

While the CFA Institute is extremely secretive in the way it grades the tests, it does give some details about its methods and the overall procedure. The CFA tests are both computer-graded and approved by the charter holders of the CFA.

For all multiple-choice parts in Levels 1, 2, and 3, the exams are machine graded. The essay section of the Level 3 exam is graded by the charter holders of the CFA who travel to Charlottesville, Virginia, to grade these essays.

Once the exams have been graded, the CFA Governing board shall set the minimum passing score (MPS) for each level. The goal of the MPS is to establish a uniform difficulty level and fairness throughout the exams. The MPS has not been released.

Since the CFA Institute does not disclose the MPS, it is impossible to determine your passing grade for each test. You do not get a numerical score when you submit the results of your CFA test. Alternatively, you will receive a:

  • The “Pass” or “Didn’t Pass” result. “Pass” indicates that your performance has met or exceeded the MPS. “Didn’t Pass” indicates that your score was lower than the MPS average.
  • Overview of how you did each subject area covered by the test, as well as the total number of points you received in each subject area. Instead of getting one rating for each subject area, the score range is less than 50 percent; between 50 percent and 70 percent; or more than 70 percent for each subject area.

Frequently Asked Questions

Why did the CFA institute add cryptocurrency to their exam?
Investment managers and other institutional finance professionals are urging their customers to add cryptocurrency alternatives to their portfolios. These investment managers begin to talk to each other, and unavoidably at least some of them may be active members of the CFA Institute. The CFA Institute introduced a requirement for cryptocurrency knowledge, and thus decided to add it to their program.

How much does a CFA earn?
According to the CFA Society, the average total salary for charterholders (in the U.S.) is roughly $300,000. The average basic CFA salary is approximately $180,000, leaving the balance to be divided between cash bonuses and equity or profit-sharing.

Is taking the CFA worth it?
CFA is among the best investments you can make in your financial career. Benefits could take time to come. If you’re already an MBA, CFA is a great add-on in India. The job opportunities of CFA versus MBA can never be compared as an MBA requires more time, effort, and money and will certainly give you better options to get started. So if you pair it with a CFA certificate, you’re going to reap your returns in the long run.

Is CFA ethics same for all years?
Yes, for the most part. The CFA ethics shall be the same for each level and shall be assessed throughout all levels. If you’re very persistent in studying them at level 1, you’re going to reap the rewards at all following levels.

Why do CFA charterholders pay to remain a CFA member?
To maintain the charter, the holders must certify both the ethical status and the yearly requirements for professional development. As a member of the CFA Institute, qualified education is sponsored and promoted. Also, networking and social incentives are provided by staying a member of the organization that encourages career growth.

CFA Preparation Guide

The CFA exam is not just a test of one’s intelligence, but also of their stamina, hard work, creativity, and will. It is designed in a way to demonstrate one’s dedication to becoming a CFA charterholder. Like other standardized tests, learning to take the tests is just as important as knowing the content.

All three CFA exams are structured as a self-study program, but whether you choose to do it on your own or with the help of a tutor or a study course, there are some things you need to consider to prepare effectively for taking the tests.

  1. Come up with a study strategy

In addition to the particular study skills that need to be learned to pass the tests, you need to develop a thorough study plan that includes time management, skill evaluation, and numerous previous and sample exams.

  1. Consider self-study but don’t rely on it

While many have passed the CFA tests by studying on their own, this is certainly the most difficult method. The amount of information the candidate needs to absorb is so large that it could be overwhelming. This approach enables the candidate the greatest number of freedom to manage resources and time; however, those who are not diligent in studying consistently for six months or so until the test face the risk of leaving so much information to be learned in a short time.

  1. Take a study course

There are a number of course options available, from weekly classroom programs to short-term immersion courses. Several local CFA companies are conducting pre-exam courses, and there’s an ample supply of third-party vendors offering similar services. The benefit of taking a course in preparing for the examinations is that it compels the candidate to focus regularly on some parts of the exam. In most of the courses offered, the students also need to take timely sample tests and help them to decide where their flaws lie.

CFA Sample Questions

Question #1

The feature of a well-functioning investment industry that gives investors the ability to quickly buy and sell a significant amount of an investment without having a material impact on the price is described as:

  • liquidity
  • competitive markets
  • risk transfer

Question #2

According to fundamental ethical and professional principles applicable to the investment industry, which group should have its interests ranked first?

  • Clients
  • Employers
  • Co-workers

Question #3

If two variables do not have a strong (linear) relationship, the correlation coefficient between the two variables will be closest to:

  • 0
  • -1
  • +1

Question #4

An investor attempting to replicate a price-weighted index would hold an equal:

  • percentage of outstanding shares of each security in the index
  • amount invested in each security in the index
  • number of units (shares) of each security in the index

Question #5

A consumer pays off a car loan held by a bank with which he has no other business. Which of the following is the most appropriate document management practice for the bank to follow?

  • Return all documents to the consumer
  • Shred all documents related to the transaction
  • Determine which documents to retain and which to dispose of