CFA Level I

[dreamwalker]

So I heard a lot of people use study notes for this instead of reading the actual text..

I'm signing up for the Dec '09 exams..

Was wondering what to focus on for those who have written it before.. my friend told me not to read the books, but 'purchase' or 'acquire' study notes for them.

I'm unsure of this strategy.

Tips?

[DAM2]

What are the steps one needs to take to write the exam?

I don't even feel like googling it to be honest... as consideration I will post some CFA LV 1 "tips"/"common errors" that are on a blog that I have bookmarked...

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- Forgetting to take the calculator out of BGN mode

- Computing a zero-coupon bond withouth semi-annual compounding

- Forgetting to double the yield after calculating a semi-annual coupon bond when they clearly ask for annual yield

- Getting number of discounting periods wrong! e.g. using 5 years instead of 4 because of question regarding beginning/end of period payments

- Answering the question based on variance and not standard deviation!!

- Being careless about questions that already give you the market premium... so you do not need to subtract the risk free rate.

- Automatically assuming a distribution is normally distributed when the questions doesn't say that at all!!

- Forgetting about certain synonymous terms. e.g. coupon rate = nominal rate. Market maker = specialist.

- Not being careful about whether the question provides a sample of data or a full population of data.

- Getting overvalued/undervalued confused. Over/under term refers to position of SML relative to expected return.

- Thinking that if one covariance is greater than another... that this automatically means there is a stronger relationship... when in fact you need to find the correlation to compare on standardized terms.

- Forgetting that you must pay tax on implicit interest on a zero-coupon bond. (bit more specific, but important).

- FAILING TO RECOGNIZE THAT SOME QUESTIONS THAT APPEAR TO REQUIRE COMPLEX MATH CAN BE SOLVED LOGICALLY IN 2 SECONDS. e.g... remember than the realized rate of return must fall between the YTM and the Reinvestment Rate.

- Forgetting that in an FRA, the long position wants interest rates to rise!

- Forgetting that swap payments are paid in arrears... i.e. you use the rate from the beginning of the period, not the end.

- Equity margin = borrowing. Future margin = posting cash.

- CFA considers anything related to real-estate to be real estate investing.. e.g. MBS/CMOs

- Market value of real estate does not equal investment value of real estate. Investment value with factor in user specific details such as plans for use and individual tax rates.

- The cost of failure of a venture capital project is not 0. You still have all those costs to date to deal with!

- Economic depreciation and accounting depreciation are VERY different. Economic deprecation is about value. Accounting depreciation is about allocation.

- Duties to employers go out the window if you are protecting clients/capital markets.

- Non-renewable resources have elastic supply (this still feels counter intuitive).

- Land is not depreciated.

- Do not confused the effects of capitalizing costs with capitalized leases!

- Working capital is higher under an operating lease. In a capital lease, current liability will increase by the current portion of the lease obligation without an increase in current assets.

- Market risk = systematic risk = non-diversifiable risk = risk you are compensated for.

- Sinking fund provision is an OBLIGATION not a right to pay-down debt.

- If OAS < dtl =" Tax" mccullum =" Monetarist" taylor =" Keynesian">

- Volatility always increases the value of an option. Whether or not it increase the value of a bond depends on whether the option benefits the issuer or the holder.

- Dollar duration is calculated off current market price, not PAR.

- When in doubt, use market prices and not book prices!

- Frictional and structural unemployment are part of life. It's cyclical unemployment that causes moves with the business cycle.

- Wealth effect is not the same as income effect. Wealth effect argues that inflation will cause increased savings so people regain their original level of true buying power. Income effect argues people work less the more $$ they have.

- In long run, increasing money supply will just increase prices all else equal.

- Unanticipated inflation causes inefficient/poor decisions regarding wage rate and borrowing/lending decisions. Anticipated inflation also leads to mkt inefficiency as people waste time focusing on how to circumvent inflation, make fewer investments, etc.

- Anticipated inflation simply looks like a movement up the LAS curve... real gdp stays in line with potential gdp. Unanticipated inflation mirrors the patters of demand pull inflation.

- Book value of debt reported based on market rate at time of issuance... which can be very different over the life of the debt.

- Receivables sales when a portion of risk is retained by seller is effectively a collateralized loan.

- An arbitrage opportunity with abnormal return may still not be a positive return.

- GIPS Standards: F.lawed I.nputs C.an C.ause D.oomed P.erformance
Fundamentals of Compliance
Input Data
Calculation
Composites
Disclosure
Performance
(... and then Real Estate and Private Equity)

- Industry Cycle: P.lease A.void M.y S.tupid D.eficiency
Pioneering Growth
Acceleration
Mature Growth
Stabalization
Deceleration

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[verteqz]

I sat in for level 1 last week - all I did was use Schweser and their Qbank and I felt very comfortable with the exam. I bought all the materials from some guy off Craigslist for $40 flat. I did not touch the original CFA books at all.

My cousin also focused only on Stalla/Schweser notes and Qbank and he passed on his first try. We both have business backgrounds (he is done his undergrad, I just finished 3rd year).

If you have zero background in econ/finance/accounting I suggest you go through the books, otherwise the notes from Stalla/Schweser will be sufficient.

[TooSoonJr]

Accounting Major here, wrote it during my 4th year at school and I only studied the Schweser material (it was more than enough). Passed on first attempt. As long as you do 2000+ Questions from the Q bank and you are scoring over 70% you are laughing.

[akirika]

I sat in for level 1 last week - all I did was use Schweser and their Qbank and I felt very comfortable with the exam. I bought all the materials from some guy off Craigslist for $40 flat. I did not touch the original CFA books at all.

My cousin also focused only on Stalla/Schweser notes and Qbank and he passed on his first try. We both have business backgrounds (he is done his undergrad, I just finished 3rd year).

If you have zero background in econ/finance/accounting I suggest you go through the books, otherwise the notes from Stalla/Schweser will be sufficient.

i thought you had to be in your last year to write the CFA lvl 1. how were you able to write it in 3rd year?

[torseller07]

Get the notes and study them. Basically, every details that they mention in the notes could be potential exam materials. This means you really need to know all the notes by heart before you go into the exam.

If you are going with SchweserNotes, I strongly recommend you to buy them since it comes with Q-Bank, online instructor's office hours and most importantly, errata. (Errata used to be available to public but Schweser changed that this year I believe.) Q-Bank is a very useful regressive tool to help you retain materials in your memory. How many hours you need to spend vary depending on your background. In general, if you come from a non-finance background, do expect to spend about 20-25% more time than the CFAI recommended dosage (which is roughly 250 hours).

For the last month of the exam, get Schweser's Secret Sauce, read it and keep it with you 24/7. If you can recite anything from Secret Sauce by exam day, and have scored 70% or higher on mock exams, you are pretty much set. CFAI would provide free mock and sample exams. Make sure you do those. If you have money to spare, work on the paid sample exams as well.

[verteqz]

i thought you had to be in your last year to write the CFA lvl 1. how were you able to write it in 3rd year?

That's something they don't actually check. I know someone in the 3rd year of a 5 year program and he took it and passed without a hitch. There is a requirement for level 2 though, something about showing proof of graduation before being able to receive credit for level 2.

I don't think many people know this though - I myself was dissuaded from taking level 1 until I heard that my friend took it. If I had known sooner I would have done it in year 2.

[DaFonz]

Just study with teh schwesers. If you can get 70%+ on the book 7, then you'll be fine.

[wacky632]

Just study with teh schwesers. If you can get 70%+ on the book 7, then you'll be fine.

Yea i used the Schweser books too... for book 7(the exams) I was getting 60 - 65% and passed... the actual exam is alot simpler so dont beat yourself too much if you're not doing so great on Schweser.

[kobayashi017]

If you want all the ins and outs of the CFA designation including all three exams, go to http://www.analystforum.com/phorums/index.php?23. It's like RFD's forums, but CFA all the time.

As for myself, I'm an Economics/Accounting major. Only used Schwesser. Passed L1 on first attempt.