CFA Level 1

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CFA Level 1

Chartered Financial Analyst (CFA) is a globally recognised designation provided by the CFA Institute. To attain this certification, candidates are required to pursue the CFA course which comprises a total of three levels of exam. It assesses students on a varied range of concepts, be it Financial, Accounting-related or Mathematical. By completing the CFA course, you can choose from various prospects available in the Finance and Investment sector globally. If you are planning to study this program, here is a comprehensive blog that details the key essentials of CFA level 1, what it comprises of as well as its exam pattern and marking scheme.

Overview of CFA Exam

The CFA exam is bifurcated into three parts: Level 1, Level 2 and Level 3. Quite similar to the CA course, candidates need to clear all three levels of this exam in order to qualify for the certification of Chartered Financial Analyst (CFA). The CFA Level 1 mainly evaluates a candidate on their basic knowledge of investment tools and moving to the next level, the complex analytical concepts, as well as understanding of asset valuation, is examined. Then, for level three, the advanced level concepts of Finance and Investment are assessed including portfolio management, and wealth planning, amongst others.

What is CFA Level 1?

The Level I test is divided into two 135-minute sessions with 180 multiple-choice questions (session times are approximate). Between sessions, there is an optional break. Candidates must take both sessions in order to receive an exam result.

  • 90 multiple-choice questions covering ethical and professional standards, mathematical methodologies, economics, and financial reporting and analysis in the first session (2 hours, 15 minutes).
  • 90 multiple-choice questions covering corporate finance, equities, fixed income, derivatives, alternative investments, and portfolio management in the second session (2 hours, 15 minutes).

Exams for the CFA are currently held across India, with capacity limitations and other restrictions. Aspirants who missed the November test owing to the continuing pandemic can take the CFA Institute’s Online Proctored Test (OPT). Candidates will get further information about OPT through email.

CFA Level 1 Syllabus

As the beginning step of the course, the CFA level 1 mainly constitutes of basic concepts of the academic disciplines of Finance and Investment. The cutoff for different subjects can vary and here is a table enlisting the different subjects of the level 1, general marking scheme as well as the included topics.

Subjects in
CFA Level 1
Percentage
of Marks
Topics
Ethics  15  Global Investment Performance Standards
Standard of Professional Conduct 
Financial Reporting analysis 15  Income statement
Drafting Balance sheet
Financial Reporting Mechanics and Standards
Equity Investment 11 Market Efficiency 
Security Market Indices
Market Organization and Structure
Fixed Income Analysis 11 Fixed Income Markets 
Fixed Income Securities
Introduction to Fixed Income Valuation
Quantitative Analysis 10 Discounted Cash Flow Applications
Time Value of Money
Statistical Concepts and Market Returns
Corporate Finance 10 Cost of Capital
Capital Budgeting
Economics 10 Firm and Market Structure
Demand and Supply Analysis
Aggregate Output, Prices,
Economic Growth 
Portfolio Management
and
Wealth Planning
Basics of Portfolio Planning and 
Construction
Derivatives  Derivative Markets and Instruments
Alternative Investment Mutual Funds
Real estate

Ethics and Professional Standards

The code of conduct, professional standards, and the Global Investment Performance Standards are all covered in this section (GIPS). The subject has between 27 and 36 questions, and the Institute takes this component very seriously. If a candidate’s scores on all other topics are low or close to the minimum passing score, the score on this part may determine whether the candidate passes or fails. One advantage of studying ethics thoroughly is that it aids in the preparation for Level II and Level III exams.

Quantitative Methods

While the ethical component is more scenario-oriented and straightforward, the quantitative methods section may be scary to certain students. A PhD in mathematics is not required to excel in quantitative approaches, but a foundation in statistics is obviously advantageous. With an 8%-to-12% weighting, candidates should expect 15 to 22 quantitative method questions. The topics covered are designed to provide an understanding of the analytical tools and methodologies required for financial analysis and investment decision-making.

Economics

The economics component assesses understanding of fundamental micro and macroeconomic concepts. These include supply and demand analysis, oligopoly and monopoly market structures, aggregate output, prices, economic growth, and business cycles and their impact on economic activity. Economics accounts for 8% to 12% of the Level I test.

Financial Reporting and Analysis

With a weight of 13% to 17%, this is the second-largest section on the Level I exam. Financial reporting and analysis have a somewhat lower weight in the Level II course, therefore it’s critical to devote adequate time to studying this topic to lay a good basis for following exams.

Candidates will be expected to evaluate and comprehend primary financial statements (balance sheet, income statement, and cash flow statement), as well as understand ratios and a variety of advanced topics such as revenue recognition, inventory analysis, long-term assets, and taxes.

Corporate Issuers

The part on corporate finance follows financial reporting and analysis and has an 8%-to-12% weight in the Level I exam. It introduces corporate governance as well as investment and financing decisions. This topic also emphasises the growing importance of environmental and social factors in investing. Capital planning, cost of capital, leverage, and working capital management are all important concerns.

Portfolio Management

The Level I exam solely covers the fundamentals of portfolio management. The Modern Portfolio Theory and the Capital Asset Pricing Model are key principles. This portion contains between 9 and 15 questions and serves as preparation for Levels II and III, which focus on the application of portfolio management expertise.

Equity Investments

The section on equities discusses equity markets and instruments, as well as valuation methods and techniques. Candidates should pay great attention to this subject because it establishes the groundwork for Levels II and III of study. The Level I exam has about 10% to 12% equity questions, with the majority of the questions focusing on evaluating and analysing companies.

Fixed Income

Following equities, the exam moves on to fixed-income markets and related instruments. Candidates must be familiar with the characteristics of various fixed-income instruments as well as how to price them. The yield measurements, duration, and convexity are all significant concepts. This section also covers structured instruments like mortgage-backed securities and collateralized mortgage obligations. Fixed income questions make up 10% to 12% of the exam.

Derivatives

Derivatives, like portfolio management, are only introduced in Level I. Candidates will be examined on the fundamentals of futures, forwards, swaps, options, and derivative hedging techniques. This area, like portfolio management, has a 5%-to-8% weight in the Level I test, which corresponds to between 9 and 15 questions.

Alternative Investments

Alternative investments covered in this section include real estate, private equity, hedge funds, infrastructure, and commodities. The Level I curriculum for alternative investments is introductory in nature, with an exam weight of 5% to 8%, therefore expect between 9 and 15 questions. Candidates should take this section seriously given its increased importance in recent years and the fact that it has a somewhat larger weight in Levels II and III.

CFA Level 1 Fees

Particulars Fees (USD) Fees (INR)
CFA level 1 enrollment fee 450 33,722
Early registration fee 700 52,456
Standard registration fee 1000 74,938

CFA Level 1 Eligibility Criteria

As the commencing step of the CFA course, candidates need to meet the eligibility criteria of the first level in order to register themselves for this exam. Here are the major prerequisites you need to fulfil in order to qualify for CFA level 1:

  • The candidate must have completed their undergraduate degree and those who are in the final year of their graduation are also eligible.
  • 4 years of work experience in a Finance-related career profile or a combination of their university education as well as employment should be a total of four years.
  • The candidate needs to submit more than two reference letters from reputed and established professionals in the Finance and Investment industry.

CFA Level 1 Exam Format

Before detailing the CFA level 1, let’s take a look at the general format and structure of the three levels of this course.

Level No. Of Questions Types of Questions Duration
CFA Level 1 240 Multiple Choice Questions 6 hours
CFA Level 2 120 Combination of Questions and Essays 6 hours
CFA Level 3 120 Essays 6 hours

How To Prepare For CFA Level 1

Giving oneself ample time to study is one of the most significant approaches to prepare for the CFA Level I test. Candidates can tailor their preparation for the CFA Program to their own requirements and circumstances. The data below should be taken into account while devising a study strategy for the CFA Level I test.

  • The average successful applicant reported preparing for the Level I test in June 2019 for 303 hours.
  • Because the CFA Level I test is self-paced, applicants will devote varied amounts of time to prepare for it, depending on how close their exam date is. For example, if a candidate spent a year studying for the CFA Level I test, he or she would have spent around 25 hours each month studying.
  • On average, it takes 4–5 years for a candidate to pass all three tests. Successful applicants report studying for each level for roughly 300 hours, with the CFA Level I test taking 303 hours, the CFA Level II exam 328 hours, and the CFA Level III exam 344 hours.

CFA Level 1 Subjects

The key disciplines included under the CFA Level 1 are Finance and Economics-related concepts and some of these subjects have been elaborated on below:

  • Financial Reporting Analysis: It involves the study of principal financial statements, analysis of financial reports, decision-making processes for investments, and financial reporting, among others.
  • Fixed Income Analyses: It comprises of an introduction to how the yield curve affects portfolio strategies and risk management including implied spot rates, convexity, duration and interpreting the future.
  • Quantitative Analysis: This concept in CFA level 1 includes the study of money, time, probability and descriptive statistics along with techniques essential in financial analysis.
  • Economics: It includes several principles of microeconomics and how they are used to assess the marketplace behaviour of consumers and firms. 
  • Equity Investment: This subject involves an understanding of how to calculate the estimate of the company’s intrinsic value and varied additional valuation methods.
Book Names Authors
Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions Pearl and Rosenbaum
The Handbook of Fixed Income Securities Frank J. Fabozzi
Strategic Value Investing: Practical Techniques of Leading Value Investors Stephen M. Horan, Robert R. Johnson and Thomas R. Robinson
2022 CFA Level I Kaplan Schweser
CFA Level I Bhupesh Ananad

Job Prospects

After successfully qualifying for CFA levels 1, 2 and 3, the candidates are provided with the certification of the Chartered Financial Analyst. Since it is a globally renowned qualification, you can discover plentiful opportunities in the Finance and Investment industry on an international level. Some of the major career profiles you can pursue after attaining the CFA certification are:

  • Portfolio Manager
  • Private Banker
  • Research Analyst
  • Financial Advisor
  • Relationship Manager
  • Financial Strategist

FAQs

Is CFA Level 1 tough?

CFA exams are not easy, and Level 1 is just the start. Commonly cited as one of the world’s hardest exams, CFA Level 1’s difficulty is comparable to a diploma level and gets harder from then on.

What does CFA Level 1 consist of?

The Level I exam consists of 180 multiple choice questions, split between two 135-minute sessions (session times are approximate). There is an optional break between sessions. Candidates must take both sessions to receive an exam result.

How long does it take to study CFA Level 1?

Successful Level I candidates spend roughly 300 hours preparing for the exam. The best strategy is to leave at least four months (approximately 17 weeks) to finish all the reading material.

Thus, we hope that this blog provided you with the key essentials of the CFA level 1 and what it entails. If you are planning to pursue a professional program in Finance or Accounting, our Leverage Edu experts are here to guide you throughout the process of finding an ideal course and university that aligns with your interests and career aspirations.

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