What will come up on the test...Realistically

Hey guys, Here are my quick 2 cents about the test. I am in no way undermining the breadth/depth of Level II. But working through some of the Schweser Practice Exam questions (book1) made me think: you know what, they can only test you on so many questions per topic. So will we really expect to calculate some of the more involved(and in my mind ‘2nd tier’) problems including: Arbitrage cross rate profits (Econ), CTA and Remeasurement from SCRATCH(FSA), those intense swaption calcs (Derivatives), and those Corporate Finance Expantion CF problems? Maybe it’s me, but Schweser had me think I overstudied these calculation intensive topics from Level I. i think what I’m curious about is, those LEFT FIELD questions that supposedly come up on the exam- are they those calculation intensive topics i listed above? I think you Level II retakers would have a clearer opinion on this post.

It’s true CFAI can only test you so much in a 6 hours exam. To counter this, CFAI increases the breadth (or coverage) of the exam, so that it is more difficult to guess which topics would be on the exam. i.e. overwhelming with volume. Unfortunately, there aren’t a lot of short cut I am aware of to deal with the volume issue, except more passes and practices. My experience though is that you need to reach a certain threshold when you finally start to grasp the big picture (of the whole curriculum). Once you reach that point, all the association between the various LOS would become clear. So when you are reviewing one LOS, you would also be (indirectly) reviewing the associated LOS as well. My advice: if you are low on time, make sure when you are going to study a topic, make sure you are good at it. i.e. trade depth for breadth. Remember: you only get points for correct answers, and you don’t need 100% to pass the exam. As far as guesses are concerned, yours is as good as mine.

You’re not getting any responses to this because the answer is YES. You have to know what you listed, and beyond that you need to know pretty much everything. Last year swaptions and currency gains/losses were absolutely tested and any of it’s fair game for this year. Those aren’t even really “left field” - left field was two vignettes on the Balance of Payments and Minimum Variance Frontier. You can only test so many questions per topic but those questions can and will come from ANYWHERE, so do yourself a favor and stop trying to game the test and just learn it. Yes, all of it. And 2/3 of what you study will never even show up, but that’s the nature of the beast. Obviously, if you don’t know the “first tier” stuff, you better get that down first, but minimizing or trying to skip entire parts of the curriculum is a surefire way to guarantee yourself a fail.

@aimee: wouldn’t the MVF and BOP stuff be a good sort of curve ball though? I mean that stuff is just plain basic. If you know the basis for the calculation for either you should be able to reason through the most questions they ask you, no? Or did they just ask absolutely ridiculous questions on top of throwing those topics in there? I would greatly appreciate any insight.

Haha. That’s cute :slight_smile: I can’t remember the exact questioning but I (and most of the forum) was completely stunned when I got to these sections. Two of the econ Q’s revolved around calculating the BOP and anyone who studied knows that the equation should balance to 0 and that goods/services make up the current account and investments make up the capital account, but I was pretty much helpless to come up with the answer with the inputs they gave. I thought I knew which was what going in but I could never get the thing to balance… I believe the calculations included imports/exports, some kind of spending by tourists, dividend income, foreign aid, and others I’m sure I’ve forgottten by now. Not at all straightforward and a ton of people were thrown off by that one. For PM, there were questions about the theoretical assumptions/differences between the domestic CAPM, international CAPM, and extended CAPM. If you study thoroughly and evenly then hopefully you would know them well enough to get the questions right, but both of these make up a half a page (if that) in Schweser and when you’ve answered 100 questions on foreign exchange cross rates and such, it’s easy to forget about these other pieces. Not an excuse by any means, but I know in my case I had limited study time and focused too much on the “big dogs,” leaving me clueless on both of these sections. In any case, I don’t think anyone who sat last year would have characterised those sections as “basic”.

Aimee – you are scary and scaring me.

Thanks for that Aimee, that sounds like they threw the fing complicated versions at you. What is extended CAPM anyway? I didn’t see that anywhere in the CFA readings. Or is that how Schweser refers to the Fama-French, Fama-French-Carhart, and the Pastor-Stambaugh models?

That’s funny because that’s exactly what I said on test day - “WTF is extended CAPM???” Check out page 269 of the Schweser notes (book 3), it’s there. I haven’t gone through PM all that thoroughly yet so I can’t really answer that just yet.

extended capm is using the domestic capm to model firms internationally. that’s about all i know.

I see that’s a bunch of BS, they give you like 15 reasons for why you can’t use domestic CAPM in the international setting.

I was just talking to a friend about this yesterday. CFA doesn’t prepare you for real life!

No one says it has to make sense; if its in the book, know it! :slight_smile: And sorry if it sounds like I’m trying to scare you guys, but I just don’t want to see anyone here have to go through L2 a second time like I am. Fact is there will be some out-of-nowhere questions that nobody anticipates but if you know your stuff in the other areas it hopefully it won’t hurt you too badly. Several people bombed these two sections but their marks elsewhere were good enough to pass. My problem was that I aced Ethics, Corp Fin, and FSA but got average or worse marks everywhere else, and I’m pretty certain that had I managed to get a 50-70 in the areas that I bombed, I would be studying for L3 right now. Any smart study strategy will give more focus to the core topics but you also don’t want to be completely blindsided by any area because it’s just really hard to recover from a 2/6 or worse. I suppose that’s why they say to know “something about everything and a lot about some things!” It’s just really hard to anticipate where those left field questions will come from… I felt relatively confident going in about econ and PM but little did I know! :slight_smile: