Chartered Financial Analyst (CFA) is a globally recognized 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 exams. 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 as well as its exam pattern and marking scheme.
This Blog Includes:
- Overview of the CFA Exam
- What is CFA Level 1 Exam?
- CFA Level 1 Exam Syllabus
- CFA Level 1 Exam Fee
- CFA Level 1 Exam Eligibility Criteria
- CFA Level 1 Exam Format
- How To Prepare For CFA Level 1 Exam
- CFA Level 1 Exam Subjects
- CFA Level 1 Exam Recommended books
- CFA Level 1 Exam Tips
- Job Prospects
Overview of the 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 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. Moving to the next level, the complex analytical concepts and understanding of asset valuation are examined. Then, for level three, the advanced level concepts of Finance and Investment are assessed including portfolio management, and wealth planning, amongst others.
|Chartered Financial Analyst Exam
|Level of Exam
|The Chartered Financial Analyst Institute
|Duration of CFA Level 1 Exam
|Two equal sessions of 2.15 hours each make up a total length of 4.5 hours.
|Frequency of Exam
|Four Times in a Year: February, May, August, and November
|Mode of the Exam
|Language of Exam
|USD 350 (INR 28,897)
Must Read: CFA Chartered Financial Analyst Course
What is CFA Level 1 Exam?
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 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.
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CFA Level 1 Exam Syllabus
As the beginning step of the course, the CFA level 1 mainly constitutes basic concepts of the academic disciplines of Finance and Investment. The cutoff for different subjects can vary and here is a table enlisting the various subjects of the level 1, general marking scheme as well as the included topics.
CFA Level 1
|Global Investment Performance Standards
Standard of Professional Conduct
|Financial Reporting Analysis
Drafting Balance sheet
Financial Reporting Mechanics and Standards
Security Market Indices
Market Organization and Structure
|Fixed Income Analysis
|Fixed Income Markets
Fixed Income Securities
Introduction to Fixed Income Valuation
|Discounted Cash Flow Applications
Time Value of Money
Statistical Concepts and Market Returns
|Cost of Capital
|Firm and Market Structure
Demand and Supply Analysis
Aggregate Output, Prices,
|Basics of Portfolio Planning and
|Derivative Markets and Instruments
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Ethics and Professional Standards
The code of conduct, professional standards, and the Global Investment Performance Standards are all covered in this section (GIPS) with a weight of 15% to 20%. 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.
While the ethical component is more scenario-oriented and straightforward, the quantitative methods section may be scary to certain students. A Ph.D. in mathematics is not required to excel in quantitative approaches, but a foundation in statistics is advantageous. With a 6%-to-9% 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.
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 6% to 9% of the Level I test.
Financial Statement Analysis
With a weight of 11% to 14%, 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.
The part on corporate finance follows financial reporting and analysis and has a 6%-to-9% weight in the Level I exam. It introduces corporate governance as well as investment and financing decisions. This topic also emphasizes the growing importance of environmental and social factors in investing. Capital planning, cost of capital, leverage, and working capital management are all important concerns.
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The Level I exam solely covers the fundamentals of portfolio management. The Modern Portfolio Theory and the Capital Asset Pricing Model are vital principles. This portion contains between 8 and 12 questions and serves as preparation for Levels II and III, which focus on the application of portfolio management expertise.
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 11% to 14% equity questions, with the majority of the questions focusing on evaluating and analyzing companies.
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 11% to 14% of the exam.
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 covered in this section include real estate, private equity, hedge funds, infrastructure, and commodities. The Level I curriculum for alternative investments is introductory, with an exam weight of 7% to 10%, 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.
Must Read: CFA Syllabus
CFA Level 1 Exam Fee
|CFA level 1 enrollment fee
|Early registration fee
|Standard registration fee
|Late registration fee
CFA Level 1 Exam Eligibility Criteria
As the commencing step of the CFA course, candidates need to meet the eligibility criteria of the first level to register themselves for this exam. Here are the major prerequisites you need to fulfill 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.
|No. Of Questions
|Types of Questions
|CFA Level 1
|Multiple Choice Questions
|CFA Level 2
|Combination of Questions and Essays
|CFA Level 3
How To Prepare For CFA Level 1 Exam
Giving oneself ample time to study is one of the most significant approaches to preparing for the CFA Level I test. Candidates can tailor their preparation for the CFA Program to their 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.
Also Check: CFP vs CFA
CFA Level 1 Exam 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: This involves the study of principal financial statements, analysis of financial reports, decision-making processes for investments, and financial reporting, among others.
- Fixed Income Analyses: These comprise 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 behavior 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.
CFA Level 1 Exam Recommended books
|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
|CFA Level I
Must Read: CFA Level 2
CFA Level 1 Exam Tips
- Unless otherwise stated, exam questions about financial statement analysis are based on international financial reporting standards (IFRS). The question will make it clear if it is based on U.S. GAAP.
- Be at ease using your calculator. Verify that you are familiar with how to use the calculator’s features so you can respond to the learning outcome statements (LOS).
- Respond to all inquiries. Incorrect answers are not penalized in any way.
- Don’t overdress. There is no set attire, but layering is recommended for comfort.
Candidates may require proctor assistance at any point during the exam’s normal course. Proctors will arrive at workstations as soon as they can to offer assistance. If possible, we advise candidates to finish their exams before a proctor arrives. To ensure that candidates still have enough time to answer all questions, the exam writers designed the test to account for brief pauses or interruptions.
After successfully qualifying for CFA levels 1, 2, and 3, the candidates are provided with the certification of 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
Must Read: Career in Financial Analysis
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.
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.
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 provides 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 in India or you want to study abroad, 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.