Level 1 vs Level 2

Hi guys, just wondering if anyone has been through level 2 could give a heads up on what i should be looking out for? I know that asset valuation is huge this time around so im going to focus on that and fsa. however i really want to know all the amterial in and out so what should i be paying attention to. Can any body let me know what type of valuation formula’s and models they use in level two, or do they simply beef up the P/E DDM GGM CAPM models from level 1?

Your best bet on passing level II is to (1) acknowledge that Financial Statement Analysis is a very big component of the test and, in light of this fact, (2) register for one of John Harris’ seminars. If you do the Harris seminar, you will be thoroughly prepared for FSA and may actually have a shot at passing!

Without plugging someone’s @#$%&! seminar, towards the end of the FSA book there is a list of all of the financial statement adjustments that were on either Level 1 or listed earlier in the book and use Westvaco as the example. I think its a great summary of everything FSA-related and I will be referencing that reading/section quite a bit. I’ve read through (not really studied, just read) the FSA book already, but will go back through the book in April.

I focused on Fin Stmts & Equity Valuation and scored above 70% on these but still failed. I got burned by Derivatives and Ethics. Derivatives has been at least 10% the last couple of years. Also I recommend doing CFAI problems early b/c the vignette style questions take some getting used to.

Well, outside of the differences in the material, the testing format as JoeCandidate pointed out is different. You have to read through 1-3 pages and many times there is important information buried in there pretty deep, and many times there is alot of irrelevant information left and right. As far as everything else, just like level 1, learn the material. oh yeah, and ethics is tricky.

does anyone have pdf versions of Stalla or Schweser test banks?

I crushed level one Dec 2006 with >70 in all sections. I was in the process of completing my MS finance at the time so the material was nothing new to me. I felt that I overstudied and there really wasn’t any dirty tricks being played by CFAI. I took level 2 this past June and luckily I passed but the test was on a whole nother level (obviously). I probably studied harder for level 2 but ended up being uderprepared. Basically I underestimated the degree which CFAI tries to trick you on level 2. Nothing is straightforward like level one. My advice is to look for the tricks and stay vigilent. Dont mark down the first answer that pops into you head. Be sure to evaluate all the possible answers which can help you identify whether this is one of the sucker questions. As far as what to focus on, I would certainly say that the valuation models are very important. Know them in and out. Also focus on FS adjustments. Make sure to practice alot of those types of adjustments. On the June level 2 there was an entire vignette dedicated to adjustments and even after the exam there wasn’t any resolution an AF as to what the correct answers were. So in other words, they are really tricky, ambiguous questions. As was mentioned above, you can score >70 on EV and FSA and still fail. So don’t ignore the other stuff too much. Ethics is obviously going to be trickier than level one but all you can do is try to memorize the standards and hope you make some educated guesses on gameday. Read the CFAI ethics book. The actual questions on the exam are much more convoluted then the examples they give in the book but I guess there in the same ballpark - ehh maybe same state. PM was a big issue this past June and I would recommend reading the CFAI material for this section. I used schweser entirely and got burned here <50. CFAI added an entire vignette on Treynor Black which was barely touched in the study notes. There were some angry people on this board. So in the interest of that not happening again, I would recommend reading CFAI for PM (They are packaged together now so this really isnt a huge thing) Derivatives can be tough depending on your background. I work in Fixed Income derivatives so it was an area I was familiar with. But be sure to give it ample attention depending on your strengths/weaknesses. My final advice, don’t take the exam lightly. It is much much more difficult and CFAI makes it a point to include ambiguous questions that even after the exam no one can come to a consensus on the correct answer. Be sure to know your valuation models and FS adjustments. Hope for the best on ethics and don’t forget PM and derivatives. Do all this and you have yourself a pretty good shot. Good Luck to all.

Good advice - thanks for the thoughtful comments!

good advice Bill, thanks. just one Q…everyone is probably in agreement that CFAI basically checked out where Schweser was lacking(TB) and assigned a whole vignette to that… so my Q>>> isn’t it possible that CFAI will do the same thing in 08…though it won’t neccesarily be from the Portfolio Management section…but just from where Schweser/Stalla is lacking? You can call me the David Icke of this board :slight_smile: oh. and ps. I hate that man!

I have no doubt in my mind that CFAI looks at the depth certain subjects are covered by the note providers. IMO schweser does a pretty good job with the valuation and FSA stuff in general. I think PM has historically been an area that schweser/stalla is a little light on. Maybe other past level 2ers can concur. The actual material in some of the other sections contains a lot of formulas/rules/tables you can memorize and apply pretty directly to the actual exam questions. PM on the other hand, as well as ethics, can be much more subjective and concept driven. That is where the CFAI materials shine. They do contain alot of fluff compared to the notes but you know for a fact that anything on the exam will have been atleast addressed in the CFAI materials. You can’t say the same for the study notes. Will CFAI do this again in '08? My guess is probably. But the difference being you HAVE to buy their materials. So my advice is to study as much as you can from the actual notes (considering personal time constraints) and use study notes where you feel more confident on the material and as a supplement. Obviously the degree to which each individual must prepare for each section varies, but I am basing the PM and ethics assertion on my personal experience and what other’s have told me. You can be pretty sure that going into level 2 there will be some questions that you will have never encountered or prepared for. It’s supposed to be a much more difficult test to weed out the less prepared. You really have to do a self assessment of where you stand throughout your studying to address where youre lacking. Take lots of practice questions and be hones with yourself on what you need to work on. Use the CFAI materials as much as you can. Take the practice exams they offer. They are expensive but they are truly representative of what you will face on gameday. Personally, reading the CFAI materials for PM is a good warmup for level 3 which is almost entirely PM. Its also a little (actually a lot) more interesting then accounting for multinational corporations and pensions. So use it as an opportunity to expand your knowledge base. Good luck.


you know i think all of use should seriously consider taking a bunch of the cfai pratice exams because i found on level one that the exams cfai provide for 50 bucks a pop are very similar to the exam itself. since this exam is structured differently from level I i think it would be good to bang out on a few of the CFAI exams on top of the 3rd party notes passmaster and pratice exams.