The exam took place in a huge room at the Anaheim Convention Center, the same place as last year. All three levels of CFA take the exam in the same room; I’d estimate there were about 1,000 people there. The two sessions run from 9-12 and 2-5, but you have to be in the room 30 minutes ahead of time. So, there was a lot of time spent sitting around while the staff did various administrative things.

I found the morning session to be brutally difficult. For the first time, I actually ran out of time and had to furiously fill in bubbles during the last seconds before time expired. I was very surprised by this because on practice exams I usually finished in 2 – 2.5 hours (then again, on the practice exams I consistently scored around just 50% correct). I felt like my preparation had covered most of the material, but they kept asking the “wrong questions”, i.e. questions that I was not specifically prepared for. For some of the questions  that required calculations, I wound up with answers that didn’t match one of the three answer choices, so I’d have to go back and try to rework the problem. Also, since I ran out of time, I had to make quite a few outright guesses. I suppose I should expect to get about 33% of those guesses correct.

During the lunch break I followed my strategy from last year and got a tall coffee from Starbucks; I made sure to finish the entire thing since I wanted the maximum amount of caffeine. When I came back for the afternoon session, suddenly everything was clicking. I was moving through the questions efficiently, and whenever I did a calculation it seemed to match an answer choice. I felt like I was answering the questions with a high degree of accuracy, possibly high enough to offset the difficult morning session. Then suddenly, near the end of the exam, an item set came up on a topic that I just hadn’t prepared for. In fact, I had specifically not prepared on that topic: during my study I looked at the section and thought it would take me too many hours to learn, so I decided to just take my chances and hope it didn’t appear on the exam.  Unfortunately it did, so my results for those 6 questions will be no better than random.  At least I finished the afternoon session on time.

As I stated, anything in the curriculum is fair game. You really do have to review the LOS (Learning Outcome Statements) and prepare the topics that the CFA Institute expects you to know. It’s true that Financial Reporting & Analysis and Equities constitute a big portion of the exam (the CFA Level II topic weights are publicly disclosed on the CFA website), but they are still only 35%-55% of the total. I did know these topics well and hopefully I performed strongly on them, but there were a couple of item sets on other topics that I just wasn’t adequately prepared for.

This year I followed roughly the same study strategy as last year: I worked directly from the CFA books and took the 2 sample exams and 1 mock exam from the CFA Institute. I also took a practice exam from BSAS and two practice exams from Elan Guides. Late in my preparation, I signed up for Elan and discovered they had hired Peter Olinto, one of the best teachers in the CPA/CFA exam prep industry. They have a couple of his lectures available for free; I watched part of them and they were excellent. In retrospect, I wish I had signed up for Elan and bought their online course at the beginning of my prep.

Anyhow, the exam is over now and I will have to wait about seven weeks to find out if I passed. I will update then with the results.

- Matt Kirisits

I’ve taken three practice exams so far. The first was from the Boston Security Analysts Society and it was a live, in-person exam administered with the local CFA Los Angeles society. The second was the official CFA Mock Exam, and the third was from a test prep company called Elan Guides (http://www.elansguides.com). I’m sorry to say that I only scored around 50% correct for all three exams. Each exam tested substantially different topics from the other two and had content that I wasn’t prepared for. After every exam I carefully reviewed all the questions (both correct and incorrect) and made detailed notes. Hopefully, combining all the topics from these practice exams will cover the bases I need for the real exam. I do intend to take one more practice exam from Elan Guides which will bring me to four overall.

It’s pretty widely known that Level II is the most difficult of the CFA exams. Level I has a lower pass rate (37%), but I think there are a significant number of Level I test-takers that do it on a whim, just to see if they will pass. Level II test-takers are a narrower group of people who have already passed Level I, and yet only 42% pass Level II. So it’s definitely a very tough exam that requires a great deal of study and practice.

CFA Level II Exam Format

The format of Level II is similar to Level I in that all the questions are multiple-choice with three answer choices. However, for Level II there are only 120 questions total, compared to 240 questions for Level I. Since the exam is 6 hours long, this works out to three minutes per question. Many of the questions are qualitative concepts and can be solved in under a minute, so there’s really no time pressure. However, the quantitative calculation-based questions tend to be much more difficult than those found on Level I; some require extensive reworking of financial statements to get to the answer.

The questions in Level II are grouped into “item sets”. An item set means there is a short case study followed by six questions about a particular topic. For example, there may be a case study of an analyst doing a valuation of a common stock, with included financial statements and other metrics. The six questions in the item set will all relate to the information provided by the case study.

My out-of-pocket cost for Level II was just $830, as compared to $1,215 for Level I. For Level I there was an additional fee to join the CFA program.

CFA Level II Study Plan

Over the past few months I’ve slowly worked my way through the six books provided by CFA Institute. Some of the material expands upon concepts introduced in Level I, and some if it is brand new. I’ve tried to read every chapter and do as many of the end-of-chapters exercises as I could; however, there are some sections that are just too incomprehensible and I skimmed over them. In particular, I found the chapters related to derivatives and statistical methods almost impossible to get through. There is also a very opaque section on pricing bonds with embedded options that I don’t even want to look at.

However, for the most part, I’ve enjoyed reading the CFA books. I’m a career changer into finance and I’m interested in the material for its own sake. In particular, I liked the books about Corporate Finance and Equities. The Equities book spends extensive time discussing the concept of “economic profit”, which is profit that a business earns over and above its cost of capital. The concept of “net income” as widely reported in the financial press is an accounting measure that may be vastly different from economic reality; the concepts of free cash flow, economic profit, and residual income are more closely tied to the true profit-generating potential of a business.

As of now, I’ve taken two full-length practice exams. I’m a little disappointed to say that I scored only about 50% correct on each. According to the internet, the supposed ‘minimum passing score’ is around 70% correct; that would mean 84 correct answers out of 120 questions.  So I clearly have room for improvement. However, in reviewing the exams it was clear that there were many questions for which I simply didn’t know the correct formula. For these types of questions, you either know it or you don’t; if you know the formula then you can calculate the correct answer, and if you don’t know the formula then you have to guess.

In passing Level I last year, I found that learning much of the material was amenable to brute-force memorization. I created a huge set of flash cards that included all of the formulas and concepts I needed to memorize – how to calculate financial ratios, what happens to them when conditions change, what are the key underlying concepts, etc. During the last few weeks before the exam I took these flash cards everywhere, read and reread them, and asked a work friend to quiz me during lunch. They were very helpful in passing the exam.

To some extent, I think this flash-card memorization approach works for Level II as well. Some formulas just need to memorized. However, some of the more difficult Level II material really requires a deep understanding of financial concepts and the ability to apply them in the specific context of a particular case study. On some of my flash cards I’ve had to write out whole paragraphs, and it’s better to understand a concept than to just memorize a paragraph. On the other hand, if you reread a paragraph enough times you do tend to eventually understand it.

There is another key study tip that I used last year. For the official Mock Exam provided by the CFA institute, I made sure I understood the correct approach to solving every single question. The official Mock Exam is the best source of questions available and it’s the most representative of the actual exam. Why wouldn’t you understand every single question? You don’t know what questions will appear on the actual exam, but you know the CFA Institute has provided guidelines in the form of the Learning Outcome Statements and Mock Exam questions, so you should be sure to understand them. Accordingly, I’ve been thoroughly reviewing the Level II Mock Exam and created a large set of notes and flash cards.

Concluding Thoughts

Right now the CFA Level II exam is just over two weeks away. Although I am behind in my study progress compared to last year, I intend to put in serious hours to get myself up to the 70% correct level. It’s likely that I will take another practice exam, review my notes, and do more end-of-chapter exercises from the CFA books.

That aside, the GMAC has now added a great new feature to GMATPrep – a Question Pack that is available as a downloadable add-on. The question pack is $25 and consists of 404 new GMAT sample problems that the GMAC says are “never-before-seen”. I can confirm that this is mostly true, although I did seem to recognize some of the problems from various online GMAT forums. However, the repeat questions were very small percentage of the 404 overall.

After spending some time with the Question Pack and working through the problems with several students, I’ve decided that it’s well worth the $25. There is one feature that has previously never been seen in any official GMAC study product: the questions are broken down by  easy/medium/hard. Of course, there are many test-prep company products that break down questions by difficulty, but this is the first time the writers of the actual exam have provided this level of detail. It’s such a good feature that I would now consider the Question Pack mandatory for anyone aiming for a 700+ GMAT score. Any  GMAT study plan could be improved by simply working through each level of question for Problem Solving, Data Sufficiency, Sentence Correction, etc. For example, do all the Problem Solving Easy questions, and carefully review the answers. Then do all the Data Sufficiency Easy questions, and so on.

There are approximately 35 questions each of easy/medium/hard for Problem Solving and Data Sufficiency. For a student that wants to get a high GMAT score, I’d expect the percentage of correct answers should go something like this:

Easy: 90% correct

Medium: 70% correct

Hard: 50% correct

I’ve done some of the Hard problems and they truly are very difficult; some of them are logic puzzles that can’t be solved with standard GMAT test-taking techniques. But that’s what I’d expect – the GMAT is an adaptive exam on which you are supposed to start missing questions once you reach a certain level of difficulty. The difference between a 500-scorer and a 700-scorer is that the 700-scorer got most of the easier questions correct, and started missing questions once he or she reached the 700-level of difficulty. The 500-level scorer missed many of the easier questions, so he never even reached the 700-level problems.

Overall, I’d highly recommend the Question Pack as a very valuable resource and a necessary part of any GMAT prep course.

Coupon Code for Question Pack 1

At checkout on mba.com, try entering the code “mbachat” for a small discount. The code may work for other items as well.

Author: Matt Kirisits

1. At the end of the exam, it would display your Quant/Verbal score breakdown and your overall score just one time; once you clicked away, you were unable to bring this screen back
2. It was PC-only; there was no version for Mac. This was an annoyance for tens of thousands of students. I have tutored many students who owned Macs, and they had to borrow a PC or use a work computer in order to take the GMATprep exams

After many years of providing this clunky old software, the GMAC has finally released a new version of GMATprep. Right away, I noticed a couple improvements. First and foremost, they have finally added a Mac version. Plus, the PC version now runs through windows, so you can minimize it like any other program.

Unfortunately, the questions that come with the free version of the program aren’t new. There’s 90 practice questions included, and 2 practice tests. I recognized many of the problems from the previous version of GMATprep, and others have been floating around GMAT forums for years.

However, there’s one big improvement, although it isn’t free. For $25, you can buy a Question Pack with 404 additional questions. These are all new questions that have never before appeared in any GMAT preparation material. The best part of this Question Pack is that they’ve classified the questions into “Easy”, “Medium”, and “Hard”. So, for the first time, you can focus on questions that the GMAC considers difficult. This addresses one of the major complaints about the Official Guide, which is that it doesn’t include enough hard questions.

I bought the Question Pack and think it’s excellent; I’d say it’s now required prep material for students who want to score in 700 range. If you’re aiming for a 700, you should be able to get 80% of the ‘Medium’ questions correct and at least 50% of the ‘Hard’ questions correct. Regarding the ‘Hard’ quant questions, some of them are truly brutal; this is what you can expect to see if you’re scoring in the Q48-50 range. I doubt think anyone will top 80% correct on the hard questions (except maybe Jeff Sackmann :-).

I noticed one additional flaw with the software. After taking a practice exam, if you exit the software, you can no longer review the questions and answers. You can only retrieve your score. I’m so surprised by this, that I feel like it must be a mistake that they intend to fix in a later update of the software. On the old version of GMATprep, you could review the questions at a later time; as a tutor, I found that reviewing GMATprep exams with students was extremely helpful.

Now, after taking a 3.5 hour practice exam, the software expects you to review it during the same session. That could easily take 2-3 hours, and it’s unlikely most students have enough mental energy. One possible solution is to take screenshots of the questions you missed, paste them into Word, and save them for review later.

Overall, there are some improvements and some drawbacks to the new GMATprep. I definitely recommend the $25 Question Pack for students aiming to do well on the GMAT.

Registration is only $5 through this link: QS World MBA Tour 2012.

If you are looking to gather information from many different schools, this is a good opportunity. I wouldn’t expect that you could have in-depth conversations with admissions officers – that’s more likely to happen at an information session for an individual school.

Supposedly the minimum passing score (“MPS”) is about 70% correct, so the weighted average of the categories above must have exceeded the MPS. Looking back through my posts about my study strategy, I see that I took the official practice test three weeks before the exam and only got 58% correct. After that, I made a concerted effort to thoroughly understand all of the questions I had missed; I read through the explanations, made over 100 flash cards, and redid the problems multiple times. Somehow that earned me enough extra points to pass the exam.

Overall I spent about 150 hours studing over the course of 4 months. I think that, just like the GMAT, the absolute best source of sample problems is from the test makers themselves.

Here’s my previous posts about studying for the CFA Level I:

Taking the CFA Level I Exam (March 6th)

CFA Level I Progress (May 12th)

CFA Level I Test Day Experience  (June 22nd)

New Integrated Reasoning Pill

As far as I know, the Integrated Reasoning Pill is the first set of comprehensive instructional videos for this new question type. Like GMAT Pill’s other video sets, the IR pill has a lot of material - 12 hours of new video content. Combined with the rest of the course, that makes the GMAT Pill about 42 total hours of instruction.

I’ve spent some time watching the new videos this week, and I’m impressed with the both the quality and scope of Zeke’s teaching. He’s clearly spent a lot of time developing methods for solving each of the four IR question subtypes, and he wants the student to have a thorough understanding of his problem-solving techniques. This explains the extensive runtime of the videos. Twelve hours is definitely a lot, but an in-person class would likely spend 6-9 hours on IR. The advantage of the GMATPill, of course, is that the videos can be watched anytime at your convenience. The company has also just launched an iPad application, so the complete video set can be purchased and downloaded through the Apple app store. If you chose this option, you wouldn’t need an internet connection.

Practice Pill Platform

The free GMAT practice questions (called the “Practice Pill platform) are an area where the company really innovates. Right now, if you just register on the site, you can access about 60 practice questions of each GMAT question type. Since there’s 6 question types now, that’s about 360 overall practice questions. The really cool thing about this platform is that it displays the % of users that got each question correct, so you can judge the difficulty level. It’s likely that if only 40% of people answered correctly a question correctly, then it is a 700-level question.

GMAT Pill Practice Pill Platform

In my original review, I discussed who I thought the GMATPill would be good for. It’s great for GMAT students who want directed self-study.  If you’re self-motivated and disciplined, but need an overall expert guide to cover all the important material and teach the best problem-solving techniques for each question type, then the GMAT Pill is a good idea. Keep in mind that you do have to watch all the videos and pay attention to really absorb the material.

Since my original review, I’ve communicated with Zeke through email about small suggestions for improving the course, and he’s always been very responsive. He actually has a 50-point score improvement guarantee, which is impressive for such a small company.

The current price of the whole set is $297 if you buy through this link, which is a $60 discount off the usual $357 all-inclusive price. Although that page only lists the original 5 sections, I contacted Zeke and he said that the $297 price also includes the new Integrated Reasoning pill.

Overall, I am impressed that GMAT Pill continues to develop and update their product. Some of their innovations like the Practice Pill platform and the iPad application are features that I’d only expect from larger, VC-funded companies. As an entrepreneur running a small business, Zeke has shown that there’s an advantange to being a small, digital company which can quickly respond to changes on the exam.

Author: Matt Kirisits

Just to recap, here are some quick facts about the test: The Level I CFA Exam consists of two 3-hour sessions, the first from 9am-12pm and the second from 2pm-5pm. Each session is comprised of 120 multiple choice questions, for an overall total of 240 questions. The questions have three answer choices each, and the exam uses pencil-and-paper and a scantron answer form. Two specific models of financial calculator are allowed – I used the HP BAII Plus.

The CFA Institute changes the minimum passing score each year, but it seems to be around 70%. Every question is weighted equally, so you need to aim for 168 correct answers to be confident of passing. This is different from the GMAT, which is an adaptive test in which questions can be weighted differently depending on their difficulty level.

The exam was given in a huge conference room at the Anaheim convention center. I estimated there were about 1,000 test takers in the room, but that included all three CFA exam levels. Although the exam didn’t formally start until 9am, they required everyone to be sitting quietly in their chairs by 8:30. There was a lot of sitting around while the staff did various administrative things before and after the actual exam times.

I can’t discuss the content of the exam, as the CFA Institute has very strict non-disclosure rules. I can say that, as I expected, the most accurate practice test is the full-length ‘mock exam’ that is provided by the CFA Institute. The mock exam is 240 retired actual CFA Level I questions. If you plan on taking the CFA exam, I’d recommend a thorough understanding of every single one of the 240 practice questions. I made a big pack of flash cards (over 100 in total) of formulas to memorize, and that turned out to be very helpful. Some of the questions simply required knowledge of a specific formula – if you knew the formula, you could plug in the numbers and get the question right; if you didn’t, you had to guess.

Since the CFA exam is pencil-and-paper, you can skip questions and come back to them later. Within each 120-question section, there were probably 10-15 questions that I was unsure about; I passed them over with the intention of coming back to them at the end. However, when I got to the end of the section, I actually didn’t have much time for the questions I had skipped; I wound up just choosing my first instinct. The fact that you can skip questions is a difference between the CFA exam and the GMAT. Since the GMAT is computerized, you have to answer each question before you proceed to the next one, and you can’t go back and change your answers. On the CFA exam, you can change an answer choice if you have the time to carefully erase the previous one.

There was a two-hour break from 12-2 during which we could get lunch. However, we had to be back in our seats by 1:30, and there were huge lines for all the fast food establishments on site. So the break felt a little rushed. I managed to get a tall Starbucks coffee and the 260 mg of caffeine helped me stay focused during the afternoon session. Still, I was fading out towards the end due to tiredness and mental fatigue.

Overall, the exam is definitely tougher than the GMAT, mostly due to the sheer volume of material and the 6-hour length. Honestly, after taking the CFA exam, the 3-hour time of the GMAT seems like a cakewalk.

Regarding exam prep, I prepared using 1) The CFA books themselves 2) The short 60-question sample exams provided by CFA Institute 3) The full-length mock exam from the CFA Institute and 4) A single Schweser full-length exam that I purchased for $50. I didn’t take the Schweser full-length class, and I didn’t buy the Schweser notes. After talking to other people on exam day, it seemed like no one besides me had prepared from the actual CFA books. Almost everybody had taken a Schweser course and many people had the Schweser notes. I guess it remains to be seen what is more effective.

I wish the CFA Institute gave the exam results right away. However, the results won’t be available until July 24^th. If you pass, you simply get a “pass” grade without knowing how much you passed by; if you don’t pass, they give you a general ranking of how close you came. I am looking forward to seeing how I did, and in the meantime will resume tutoring and writing about the GMAT.

Author: Matt Kirisits

As far as practice exams go, the CFA Institute gives you two resources:
1) One full-length, 240-question, six-hour mock exam written by the Institute itself, which is supposed to accurately represent the content of the real exam. This is provided as a PDF that you print out and answer with pencil-and-paper (like the real exam).

2) Two 2-hour, 60-question sample exams, which appear to be written by a third-party test prep provider, and are taken through a web browser. Annoyingly, these exams cost an extra $40 each.

This weekend I took the full-length mock exam. The result was a somewhat disappointing 58% correct. Although the CFA Institute doesn’t provide the actual percentage you need to pass the exam, the internet says that the passing score is about 70-75% correct. To be on the safe side, I am aiming to get 75% correct, which would be 180 out of the 240 questions. Based on my 58% correct result from the mock exam, I only answered 140 questions correct, so I need to improve by 40 more questions. I’m glad I took the exam this weekend since I have another three weeks to study and improve. I feel much better prepared after reviewing the answers from the mock exam.

After reviewing the answers, I came to this conclusion: many of the questions I had missed required memorizing very specific formulas or very specific facts. For example, they expect you to memorize how to calculate over 20 different financial ratios, or know the finer points of accounting differences between US GAAP and IFRS. I think this level of detail is what makes the exam so difficult – there’s just an enormous amount of material that needs to be memorized. In real life, I would just dump the calculations into Excel; but of course the exam would be easy in that case.

On the plus side, a good portion of the questions are qualitative  and can be answered correctly if you have a solid grasp of  finance fundamentals; I did reasonably well on these types of questions.

At this point I would estimate that I’ve studied for about 150 hours, and I’ve spent $1,255. I’m glad I took the practice exam this weekend; I’ve spent the past week reviewing it and I’ve now memorized another 50 formulas :-) I may wind up spending another $49 and purchasing a full-length mock exam from Schweiser. There’s certainly no guarantee at this point that I will pass, but I’m going to put in the work over the next few weeks and do my best.

Author: Matt Kirisits.