How do you memorize the formulas for CFA Levev I exam??

Question

There are so many of them....do you have to memorize all of them or do they provide you some on the test? Please anyone who has taken Level I tell me how it was and what they did to memorize these 100s of formulas??

Answer 1

First of all I can't stress this enough.  Read the LOS.  You only need to know the formulas when they tell you you need to calculate.  A good example is kurtosis.  When I took the exam they wanted me to explain kurtosis, not calculate.  Know the max and min values and what it measures and you'll be fine.  Another example is computing the mean.  The LOS told me to compare 3 methods, not calculate.  If the LOS doesn't have the word calculate or compute, then you don't need the formula.

Another thing to consider is that once you get to asset valuation, it is all based on one concept.  The present value of an asset is equal to the future cash flows discounted at the proper discount rate.  In fixed income and equity income and derivatives almost all formulas are based on this one rule.  That isn't to say there is one magical formula for the entire cirriculum, but it may help with the concepts.  The formulas in asset valuation are all doing the same thing in slightly different ways.

Finally, at level 1 the test for me was largely conceptual.  Had I gotten of the conceptual questions and ethics right I might have barely passed without using my calculator.  Do not try that at home.  Make sure you know what the formulas represent and what they are trying to do.  It is impossible to memorize all the equations but I promise you don't need to.