Preparing yourself for the CFA: must-know information

If you plan on having a career in corporate finance, the CFA is a must. CFA stands for Chartered Financial Analyst, and to become a CFA involves three tests over three years, over 250 hours of studying, and a strict code of ethics. It is the industry standard, and if completed successfully your salary potential will increase dramatically. Most employers expect you to begin the process of this exam within 5-7 years of joining the company after graduation, and to not do so is career suicide.

To even register to take the CFA exam, you must first have the fulfilled the following requirements:
· Have a U.S. bachelor’s (or equivalent) degree, be in the final year of your bachelor's degree program, or have four years of qualified, professional work experience or a combination of work and college experience that totals at least four years
· Meet the professional conduct admission criteria. During the application process, you will be asked to sign statements of Professional Conduct and Candidate Responsibility.
· Be able to take the exam in English.
To maintain your candidate status, you must commit to the CFA Institute Code of Ethics and Standards of Professional Conduct — “a commitment that cannot be taken lightly and demands that, above all else, you put the interests of your clients first. There is nothing that CFA Institute does that is more important than promoting and enforcing the use of the Code and Standards among members and candidates.”

Wondering what this exam will cover? The following is a topical outline of all the current subjects in the exam:

CFA Candidate Body of Knowledge (CBOK)

I. ETHICAL AND PROFESSIONAL STANDARDS
A. Professional Standards of Practice
B. Topical Issues

II. QUANTITATIVE METHODS
A. Time Value of Money
B. Basic Statistical Concepts
C. Probability Concepts and Random Variables
D. Common Probability Distributions
E. Sampling and Estimation
F. Statistical Inference and Hypothesis Testing
G. Correlation Analysis and Linear Regression
H. Multivariate Regression
I. Time Series Analysis
J. Portfolio Concepts

III. ECONOMICS
A. Market Forces of Supply and Demand
B. Elasticity
C. The Firm and Industry Organization
D. Supply and Demand for Productive Resources
E. Measuring National Income
F. Economic Fluctuations and Unemployment
G. The Monetary System
H. Inflation: Causes and Consequences
I. International Trade
J. International Finance
K. The Macroeconomics of an Open Economy
L. Aggregate Demand and Aggregate Supply
M. Sources of Economic Growth
N. Government Regulation
O. Natural Resource Markets
P. Relationship of Economic Activity to the Investment Process

IV. FINANCIAL STATEMENT ANALYSIS
A. Financial Reporting System
B. Principal Financial Statements
C. Earnings Quality and Nonrecurring Items
D. Analysis of Inventories
E. Analysis of Long-Lived Assets
F. Analysis of Income Taxes
G. Analysis of Financing Liabilities
H. Analysis of Leases
I. Analysis of Off-Balance-Sheet Assets and Liabilities
J. Analysis of Pensions, Stock Compensation, and Other Employee Benefits
K. Analysis of Inter-Corporate Investments
L. Analysis of Business Combinations
M. Analysis of Multinational Operations
N. Ratio and Financial Analysis

V. CORPORATE FINANCE
A. Fundamental Issues
B. Capital Investment Decisions
C. Business and Financial Risk
D. Long Term Financial Policy
E. Mergers and Acquisitions
F. Valuation Implications of Corporate Finance

VI. ANALYSIS OF EQUITY INVESTMENTS
A. Organization and Functioning of Securities Markets
B. Security Market Indexes and Benchmarks
C. Equity Risk Definition (e.g., statistical, economic, downside, relative, absolute, political) and Measurement
D. Fundamental Analysis
E. Special Applications of Fundamental Analysis
F. Technical Analysis

VII. ANALYSIS OF DEBT INVESTMENTS
A. Debt Securities
B. Risks Associated with Investing in Bonds
C. Global Bond Sectors and Instruments
D. Yield Spreads
E. Introduction to the Valuation of Debt Securities
F. Yield Measures, Spot Rates, and Forward Rates
G. Measurement of Interest Rate Risk
H. The Term Structure and Volatility of Interest Rates
I. Valuing Bonds with Embedded Options
J. Mortgage-Backed Securities (MBS)
K. Asset-Backed Securities
L. Valuing Mortgage-Backed and Asset-Backed Securities
M. Assessing Trading Strategies
N. Principles of Credit Analysis

VIII. ANALYSIS OF DERIVATIVES
A. Derivative Markets and Instruments
B. Forward Markets and Instruments
C. Futures Markets
D. Options Markets
E. Swaps Markets

IX. ANALYSIS OF ALTERNATIVE INVESTMENTS
A. Real Estate
B. Investment Companies
C. Venture Capital
D. Hedge Funds (e.g., characteristics, fee structure, leverage, short versus long)
E. Closely-held Companies and Inactively Traded Securities
F. Distressed Securities/Bankruptcies
G. Commodity Markets and Commodity Derivatives

X. PORTFOLIO MANAGEMENT
A. Capital Market Theory
B. Management of Individual Investor Portfolios
C. Management of Institutional Investor Portfolios
D. Pension Plan and Employee Benefit Funds
E. Endowment Funds and Foundations
F. Insurance Companies
G. Other Corporate Investors (investment policy considerations)
H. Capital Market Expectations
I. Asset Allocation
J. Portfolio Construction and Revision
K. Equity Portfolio Management Strategies
L. Debt Portfolio Management Strategies
M. Real Estate and Alternative Investments in Portfolio Management
N. Risk Management
O. Performance Measurement
P. Presentation of Performance Results

This year’s registration deadline:

For June 2 & 3, 2007:
15 February 2007
15 March 2007
For December 1 & 2, 2007:
15 March 2007
15 August 2007
17 September 2007

Note: there is a fee increase after every deadline, so the sooner you sign up the lower the cost.






The CFA is expensive- here is a chart of initial fees for taking the first level exam. Further fees apply for Level II and III:

Payment deadlines:

27 Sept 06
15 Feb 07
15 Mar 07

Registration Fee(one-time)
US$390
US$390
US$465




Exam Fee: Level I(enrollment)
US$370
US$455
US$690




Total Cost to Enterthe CFA Program:
US$760
US$845
US$1155


Want to try a sample exam? Samples are available for free on the CFA website:
http://www.cfainstitute.org/cfaprog/advantage/06nov/index.html *

Also, at http://ns.allenresources.com/services/gradeTest.do;jsessionid=4AA5F77F8DDB329E725DEF839989F9F4 you can answer “questions of the day” which are taken from past exams and you can immediately check your answers.

The CFA is a difficult exam, and a candidate who wants to be successful must study extensively and focus. The best way to learn the material is not to focus on answering lots of sample questions, but rather to fully understand the Learning Objective Statements (LOS) and the concepts behind them. With a less than 50% pass rate for Level I candidates, the way to success is through planning (setting up a study timeline), sticking to it, and focusing on the concepts you don’t know. Good luck!!