This study plan is based on notes taken from my 2009 journey through the CFA Level 2 exam.  There may be some curriculum differences in the next test (CFAI likes to make adjustments from year to year), so be sure to compare this material with the official CFAI books for your exam.  I used the Stalla program in 2009 and recommend purchasing Stalla or Schweser, if you have the means.  If you do not, then I still believe this plan can be implemented with the CFAI Program official materials.  Based on my score report, I was above 70% in five subject areas and above 50% in four, with only one below 50%.  In total, I correctly answered between 68% and 86% of the questions.

<strong>General Guidelines:</strong>

<a rel="attachment wp-att-659" href="https://financetrain.com/cfa-level-2-exam21-week-study-plan-part-1-of-6/level-2-study-plan/"><img class="alignleft size-full wp-image-659" title="level-2-study-plan" src="https://financetrain.com/wp-content/uploads/2010/08/level-2-study-plan.png" alt="" width="100" height="100" /></a>This study plan is designed to apply 17 weeks of subject study and 4 weeks of review.  Assuming the next exam is Saturday, June 4, 2011; you could begin this plan on Monday, January 10, 2011 and complete it just before the test.

This plan assumes you will be studying a minimum of 12 – 14 hours per week initially, and more during the final four weeks.

Purchase two (2) 100 page notebooks.  One is for notes; the other for practice problems and tests.

Make flash cards for key formulas and lists.  I made about 250.  They are easy to carry around and allow you to study while waiting in lines, riding the bus, etc.

Make a one page calendar to help with planning and progress tracking.

Be prepared to do lots of practice questions and several practice exams.  There is no substitute for logging hundreds of practice questions and 4 – 6 practice exams.

<strong><a rel="attachment wp-att-656" href="https://financetrain.com/cfa-level-2-exam21-week-study-plan-part-1-of-6/calendar/"><img class="alignleft size-full wp-image-656" title="calendar" src="https://financetrain.com/wp-content/uploads/2010/08/calendar.png" alt="" width="96" height="96" /></a>Week 1 – Ethics</strong>

Ethics is a mandatory 70%+ score section.  Risking Ethics is akin to risking the entire test, so take it seriously.  Two items sets is a reasonable expectation.

Your friend the Code and Standards appears again.  Be prepared to apply the seven Standards to professional situations.  Note that the most conservative answer choice is not always the correct one and when there is a conflict between CFAI and local laws, members and candidates must abide by the stricter of the two.

New material on Level 2 could be Soft Dollars and Research Objectivity Standards (ROS).

Given the importance of Ethics, continuously review it throughout the first 17 weeks of the 21 week plan (this is where notes and flash cards help you).  In the final days leading up to the test, make extra time to review the CFAI Ethics readings.  In the demented world of CFA testing, correctly solving some obscure ROS situation could be the difference between a pass and a fail.

 

CFA Level 2 Exam – 21 Week Study Plan, Part 1 of 6

Introductory Remarks – see <a href="https://financetrain.com/cfa-level-2-exam21-week-study-plan-part-1-of-6/">part 1</a>

General Guidelines – see <a href="https://financetrain.com/cfa-level-2-exam21-week-study-plan-part-1-of-6/">part 1</a>
<h4>Week 2 – Quant</h4>
I believe that many candidates let themselves get unnecessarily stressed about Quant.  Keep in mind it is a minor part of test.

Topics include: correlation, significance testing, single and multiple variable regression, assumptions and violations in regression analysis, and time series modeling.

If you have worked with an SPSS or other stats software, then think about how CFAI might create an item set using the data report from a regression or time series analysis.  Can you interpret the results?  Can you fill in the blanks on any missing calculations?

Ultimately, do not let all the nuances of what is basically MBA level statistics get you down.  If this isn’t your bag, focus on more heavily tested sections.
<h4>Week 3 – Economics</h4>
Like Quant, Econ is one of the lower weighted sections, but there’s a catch.  The economics of foreign exchange rates appear elsewhere in Level 2 and on Level 3.  So keep this in mind as you work through Econ.

Topics include: general macroeconomics, national income accounting, principles of international trade, and foreign exchange rates.  You could get an item set incorporating one or all of these concepts.
<h4>Week 4 – Financial Statements, Part 1</h4>
The next three weeks are Financial Statements and this is mission critical material for the serious Level 2 candidate.  Learn it, live it, love it!

This week’s material includes inter-corporate investments, accounting for acquisitions, variable interest entities (VIEs), and the impact that accounting methods for these actions have on financial ratios.  Watch out for differences in IFRS and US GAAP.  If CFAI mentions both, then they reserve the right to test on both.

You could see an entire item set on one or some combination of all of the topics in the preceding paragraph.  So be prepared.  Use a build up approach in developing proficiency.  Start by working through problems with your notes and flash cards in front of you and keep working through problems until you can do them without assistance.  It will take time.
<h4>Week 5 – Financial Statements, Part 2</h4>
Now you move into accounting for pensions and employee retirement benefits, stock based compensation, and consolidation of multinational operations with emphasis on currency translation accounting.

You could realistically see one item set on pension accounting and a separate item set on consolidation of multinational subsidiaries.  Again, note the nuances between IFRS and US GAAP.  Same approach as FSA 1, start working problems with your notes and gradually build proficiency.

 

CFA Level 2 Exam – 21 Week Study Plan, Part 2 of 6

Introductory Remarks and General Guidelines – <a href="https://financetrain.com/cfa-level-2-exam21-week-study-plan-part-1-of-6/">see part 1</a>

Upto week 5 - <a href="https://financetrain.com/cfa-level-2-exam-21-week-study-plan-part-2-of-6/">see part 2</a>
<h4>Week 6 – Financial Statements, Part 3; Progress Test 1</h4>
<strong>Financial Statements </strong>– This is the “synthesis” of financial statement analysis.  You will be tying together FSA material from L1 and L2 within the broader scope of evaluating companies.  Be prepared to make adjustments to financial statements based on footnote data.  Like the other FSA sections, this one is mission critical.

<strong>Progress Test 1</strong> – Take a progress test at this point, covering weeks 1 – 6: Ethics, Quant, Econ, and FSA.  If you do not have a Stalla or Schweser test bank, then build a progress test with the CFAI materials.  You could do 2 Ethics item sets, 1 Quant item set, 1 Econ item set, and 4 FSA item sets.  Do your best to replicate exam conditions, particularly with time limits.

Since this will be your first test, do not get too concerned about the score.  I recommend noting questions that you are unsure about.  When you grade the test, check to see if your instincts were correct or not.  For any questions you get wrong, write down why you got them wrong in your notebook.  This reduces your odds of repeating the mistake.
<h4>Week 7 – Corporate Finance, Part 1</h4>
This is one of your middle tier subjects (higher than Quant or Econ, but below Financial Statements and Equity).  In my opinion, it is an easy place to rack up points.

You will see: methods of analyzing capital projects, issues in capital investment analysis, operating and financial leverage, theories on capital structure, and dividend policy issues.
<h4>Week 8 – Corporate Finance, Part 2</h4>
This is a fairly small section.  You will look at corporate governance and M&amp;A issues.  Either could form part or all of an item set.

Given the light reading in week 8, I recommend hitting extra practice problems from prior weeks on top of the Corporate Finance part 2 material.  This will help keep older stuff somewhat fresh.
<h4>Week 9 – Equity, Part 1</h4>
This is the start of another heavy-weight.  Equity is likely 15-25% of the exam.

If you feel like the sequence for Equity is a bit random, I would tend to agree with that.  Feel free to rearrange in any manner that suits your learning needs.

In 2009, I started with alpha, methods of determining the required equity return, and introductory issues in international equities.  Plenty more to come on Equity in the next two weeks.

CFA Level 2 Exam – 21 Week Study Plan, Part 3 of 6

Introductory Remarks and General Guidelines – See <a href="https://financetrain.com/cfa-level-2-exam21-week-study-plan-part-1-of-6/">part 1</a>
<h4>Week 10 – Equity, Part 2</h4>
The fun continues this week with global industry analysis, country analysis, the business cycle, estimating growth, equity metrics and multiples, global risk premiums, and equity valuation models.

If you hit week 10 and are still on pace with your schedule, then that is a very good sign.  Do not let up on the practice problems and start to take your game up a level.  If you have been studying 12 hours per week, make the jump to 15 hours per week now.
<h4>Week 11 – Equity, Part 3; Progress Test 2</h4>
Equity, part 3 – Now you are moving into free cash flow (FCF) approaches.  Stock analysts love this and CFAI does, too.  Make sure you note the different FCF approaches.  Look for more on stock multiples and close with the challenges of running comparables analysis for international stocks.

Progress Test 2 – You should do your second progress test in week 11, covering all material to date.  Refer to the week 6 notes for approaches to building your own exam using the CFAI official books.
<h4>Week 12 – Alternative Investments</h4>
This is your CFAI intro to non-stock and non-bond investments, as well as non-traditional strategies.

There may only be one item set, two at the tops.  You will see this stuff again on Level 3.

The section should cover real estate, private equity-venture capital, private equity-LBOs, commodities, and hedge funds.
<h4>Weeks 13 &amp; 14 – Fixed Income, Parts 1 &amp; 2</h4>
This is another middle tier section, grouped in importance with Corporate Finance.

There is a lot of material in this section, so here goes: corporate credit, high yield debt, US municipal bonds, sovereign debt, fixed income security valuation, duration and convexity, yield curve principles, US Treasuries, term structure of interest rates, par-spot-forward rates, yield volatility, bonds with embedded options, convertible securities, residential mortgage backed securities (RMBS), commercial mortgage backed securities (CMBS), asset backed securities (ABS), collateralized debt obligations (CDOs), and applications of different spread metrics.

Given that some of these security types were on center stage for the global economic slowdown, they present timely exam fodder for CFAI.  Unfortunately, mastery of this material requires the ability to understand a fair amount of formulas.  Flash cards will be very helpful for Fixed Income.

CFA Level 2 Exam – 21 Week Study Plan, Part 4 of 6

Introductory Remarks and General Guidelines – <a href="https://financetrain.com/cfa-level-2-exam21-week-study-plan-part-1-of-6/">See Part 1</a>
<h4>Week 15 – Derivatives, Part 1</h4>
The CFAI has been very generous to you and saved some of the most challenging material for the home stretch.  I would lump derivatives into the middle tier with Corporate Finance and Fixed Income.  Don’t worry, you can do it.

Derivatives starts with the easier stuff and builds to the more challenging material.  In part 1, look for forward basics, currency forwards (think back to Econ), forward rate agreements, futures basics, interest rate futures, and US Treasury bond futures.

Like Fixed Income, Derivatives is a great place to incorporate flash cards.
<h4>Week 16 – Derivatives, Part 2; Progress Test 3</h4>
<strong>Options</strong> – you will see both the binomial and Black-Scholes models; both are fair game.  Interest rate options and put-call parity are other important topics.

<strong>Swaps &amp; Swaptions</strong> – look for interest rate swaps, equity swaps, and currency swaps.  The ability to draw and interpret a swap diagram is a must have skill set.  You will also be introduced to swaptions.

<strong>Progress Test 3</strong> – Now is the time to do a progress test through Derivatives.  Hopefully you are noticing improvement over the first two progress tests.  Fixed Income and Derivatives may take additional effort given the volume and complexity of some of the material.  This will be your closest experience to date with a full on practice test, so take it seriously.
<h4>Week 17 – Portfolio Management</h4>
The last section!  With expectations of one to two item sets, CFAI probably gives more information than a candidate needs or wants at this point, but this section is really a preview of things to come in Level 3.

You will see portfolio variance, CAL, CML, CAPM, SML, the Sharpe ratio and its offspring, problems with mean-variance analysis, multi-factor modeling (remember Quant?), performance measurement issues, flaws of CAPM, intro to ICAPM, the portfolio management process, and the impact of taxes on investor returns.

CFA Level 2 Exam – 21 Week Study Plan, Part 5 of 6

Introductory Remarks and General Guidelines – <a href="https://financetrain.com/cfa-level-2-exam21-week-study-plan-part-1-of-6/">see part 1</a>

If you started in mid-January, then you should be about four weeks away from exam day.  Now is the time to start studying 20 hours a week.  Call in sick to work, cancel dates, whatever you need to do to make the time.
<h4>Week 18 – Review Week 1</h4>
Do at least one full blown practice exam this week.

Review Ethics, Econ, Quant, and Portfolio Management
<h4>Week 19 – Review Week 2</h4>
Do at least one full blown practice exam this week.  If you are legitimately scoring in the low 70% range, that is a good sign.  If you are in the low to mid 60%s, you are in the ball park, just get more aggressive with your studying.

Review Fixed Income, Alternative Investments, and Derivatives
<h4>Week 20 – Review Week 3</h4>
Another full blown practice exam is needed this week.

Review the heavy weights, Financial Statements, Equity, and Corporate Finance
<h4>Week 21 – Review Week 4</h4>
Review key subject areas.  Try to improve on any weaknesses that you feel you can tie up before test day.

Keep hitting the practice problems.

Make extra time to review Ethics in the days before the exam.

Do you know how to get to your test center (exam day is not the day to learn the travel route, know it in advance).

Review CFAI’s exam rules.

Make sure your <a href="https://financetrain.com/cfa-calculator-financial-calculator-for-cfa-exam/">calculator</a> is an allowable model and that it works.

On the night before the exam, just relax.  Eat a nice meal, watch a movie, try to go to sleep early.

CFA Level 2 Exam – 21 Week Study Plan, Part 6 of 6

CFA Level II Study Plan

This frontmatter description will appear below the title

COURSE

CFA Level II Study Plan

LESSONS