By Yizhou Qu, MBA candidate in investment management
Some say that the CFA Level II exam is the most difficult of the three. In any case, Level II should be taken very seriously. While Level I focuses on basic financial concepts and formulas, Level II focuses on the application of investment concepts and tools to all types of assets, with an emphasis on asset valuation.
While some candidates are lucky enough to pass the Level I exam on skill alone, this method won't work for Level II. Why not? Because Level II is the link between the content of the first two levels, and candidates must apply all the knowledge they have acquired.
Focus on learning gains
Since students at the John Molson MBA in Investment Management are very busy, they have little time to devote to preparing for the CFA program exams. So I advise them to focus on the essentials and on the least understood content to make learning gains.
What's more, the parts of the exam dealing with ethics, financial statement analysis, fixed income and derivatives prove more difficult to master for students who didn't cover the subject at undergraduate level. I also recommend that they take the time to read the official CFA Institute textbooks and do the practice exercises immediately after completing each module, to consolidate their knowledge as quickly as possible.
Key sections of the Level II exam
Financial statement analysis is an important part of the CFA Level II exam. What's more, the exam questions in the equity section are the ones most likely to change from year to year, as the content of the exam becomes more focused on the application of concepts. For example, in recent years, the examination has shifted from an emphasis on the traditional dividend discounting model and the discounted free cash flow model, to a greater emphasis on the application of the residual income model and the economic value added model. This change greatly increases the degree of difficulty of the review.
Tip for exercising your memory
Students preparing for the CFA program exams should not simply memorize all the concepts. This will only make the experience more painful! There are far too many elements to remember, and the content is far too vast. The golden rule is to understand the material before memorizing it. Make sure you grasp the concepts before you memorize them.
My tip: every time I finish a chapter (e.g. chapter 3), I review the previous chapter (i.e. chapter 2) to deepen my understanding of the content and memorize it more easily. By using this two-chapter revision strategy, the content will be better imprinted in your memory and the material from the previous chapters will remain fresh in your mind. Personally, this approach has always served me well for my revisions and exams.
Good luck!
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