The Chartered Financial Analyst (CFA) program offers three different levels of certification, each of which requires achieving a passing grade on a six-hour exam. Many candidates find the Level 1 exam very challenging, as it requires mastering an extremely large amount of information. First-attempt passing rates on the Level 1 exam are reported to be only around 40-50%. Don't let that figure discourage you; following some preparation and exam-taking tips can substantially improve your score on the exam and boost your chances of achieving a passing grade.

1) Don't Leave Doing the Practice Questions Until the End

Students who work their way through the practice questions as they read the curriculum material tend to perform the best on the day of the test. The most effective way to prepare is to check your mastery of the material by doing the practice questions at the end of each reading section. This gives you a good idea of how well you're mastering the material, and it also gets you used to the types of questions you will encounter on the actual exam.

2) Work Your Way Through the Exam in Multiple Passes

The CFA Institute, which produces the exams, slightly adjusts the minimum passing score from year to year, but historically, anyone answering 70% or more of the questions correctly passes the exam. The important thing is to determine the accurate answers for as many questions as you can rather than trying to make sure that you answer every single question. Avoid wasting valuable time trying to answer the most difficult questions; you could have spent that time finding the correct answers to a larger number of easier questions.

A good way to maximize your number of correct answers is to go through the exam in multiple passes. On the first pass, just answer the questions that you find the easiest, the ones where you have the greatest confidence that your answers are correct. Then go through the exam again to address some of the more challenging questions, but skip over the ones you find to be the most difficult. Finally, go through the remaining difficult questions, answering as many as you can as best as you can in the time allotted for the exam.

3) Answer the Questions Based on the CFA Curriculum Material

One thing that trips up students on the exam is answering questions based on knowledge they have obtained elsewhere that might differ from the information provided in the CFA curriculum readings. Regardless of whatever level of financial knowledge you have prior to studying for the CFA exam, make sure that you understand the material and concepts as presented in the CFA curriculum. Don't use definitions of financial terms that differ from those presented in the CFA study material. Instead, master the definitions as they are given in the CFA curriculum.

4) You Don't Have to Study the Material in the Order Presented

The study material for the exam as presented in the curriculum may not be presented in the order most conducive to learning and mastering the material. Study the material in a logical way, starting with basic material and then building up to more expansive topics. Begin by studying basic quantitative methods and accounting first, followed by financial reporting and analysis. Leave broader topics such as ethics and macroeconomics for later, but don't overlook them. Ethics, for example, is an increasingly important part of the Level 1 exam, and it may account for up to 10-15% of the questions.

5) Get Familiar with the CFA Official Calculator

The exam requires doing a lot of calculations, so get familiar with using the CFA Institute's official calculator, the Texas Instruments BA II Plus. Also, familiarize yourself with all the various functions available on the calculator, such as the ICONV function for calculating effective yield, and the NPV and IRR functions for use in capital budgeting calculations.

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