Graduate Perspectives: Tips & Tricks for passing the CFA Level II exam

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Published 26 March at 09:00AM, inNews



By Yizhou Qu, MBA in Investment Management candidate

Some say that, of the three CFA exams, Level II is the hardest to pass. In any case, Level II should be taken very seriously. Whereas Level 1 focuses on basic financial concepts and formulas, Level II emphasizes the application of investment tools and concepts, with a particular focus on valuation, for all types of assets.

Candidates may be lucky enough to pass the Level 1 exam by relying on certain test skills; however, such a method does not work for the Level II exam. This is because Level II links all the learning contents of the first and second levels, requiring the candidates to apply all the cumulative knowledge.

Make a breakthrough

Since most John Molson MBA in Investment Management students are busy, there is limited time to prepare for the CFA exams. These students should focus on the most important elements and the ones they understand the least in order to make learning breakthroughs.

Furthermore, many exam components such as Ethics, Financial Statement Analysis, Fixed Income and Derivatives are difficult to master for students who have not covered them at the undergraduate level. I recommend that students take a lot of time to read the official CFA textbooks and practice the supporting exercises immediately after finishing each module in order to consolidate the relevant knowledge in a timely manner.

Key parts of the Level II exam

CFA Level II involves a lot of details on Financial Statement Analysis. Additionally, exam questions in the Equity section tend to change the most from year to year, with the examination content being more application-oriented. For example, in recent years, the exam content has shifted emphasis from the traditional Dividend Discount Model (DDM) and the Free Cash Flow Discount Model (FCF Discount Model) to the application of RI (Residual Income Model) and EVA (Economic Value Added Model). This shift in emphasis greatly increasing the difficulty of the exam.

The trick about memory

Students who take CFA exams should not rely on memorizing alone. Studying in this way will definitely make the experience very painful! There are too many knowledge points in the exam and the content is too broad. The golden rule of memorizing is based on understanding the material first. You must first understand the material and then try to memorize it.

Here is one of my study habits: every time I finish a chapter (e.g. Chapter 3), I review the things I studied in the previous chapter (e.g. Chapter 2) to ensure that I deepen my understanding and memory of the content. This ‘two-chapter review’ strategy will further commit the content to memory and the material reviewed in earlier chapters will remain fresh in the mind. I have used this study habit throughout my student life, allowing me to review and pass exams efficiently.

Good luck! 

Text provided by Concordia University