CFA Level 1 Foundations Course

The CFA Level 1 exam measures a candidate's understanding of core investment knowledge and is delivered in two computer-based sessions. Each session contains 90 multiple-choice questions, and candidates have 2 hours and 15 minutes to complete each session.

Topic weights tell you where to focus. Ethics carries the largest weight at 15–20%, followed by financial statement analysis, equity, and fixed income at 11–14% each, while quantitative methods, economics, corporate issuers, and derivatives carry smaller weights.

Question formats include standalone multiple-choice questions and item set questions based on a short vignette. Every question has three answer choices, and guessing a wrong answer does not subtract marks, so an educated answer is always better than leaving a blank.

The Code of Ethics and Standards of Professional Conduct describe the professional duties expected of CFA candidates and members. Expect questions that ask you to identify the most appropriate action in an ethical dilemma, often by applying a specific Standard.

• Study Ethics first because it has the largest weight and appears in every exam.
• Learn the topic weights and use them to allocate study time.
• Practice both standalone and item set question formats.
• Know the Standards, including Standard I: Professionalism.

Weight plan: Ethics is the highest-weight topic, so study it early and review it often. Split the 180 questions by topic weight, take a diagnostic, and schedule weekly mocks.

The time value of money is the foundation of quantitative analysis. One dollar today is worth more than one dollar later because money can earn a return, so future cash flows must be discounted to compare them fairly. The core relation is FV = PV × (1 + r)^N.

Present value and future value calculations link a single cash flow across time. With multiple cash flows, you can compute net present value (NPV) by discounting all expected inflows and outflows at the required rate of return; IRR is the discount rate that makes NPV equal to zero.

Basic probability helps you quantify uncertainty: expected value weights outcomes by their probabilities, while variance and standard deviation measure dispersion around the expected value. Descriptive statistics such as the mean, median, and mode summarize a data set, and measures like skewness describe its shape.

Hypothesis testing gives structure to decisions under uncertainty. You state a null hypothesis, choose a significance level, compute a test statistic, and decide whether the evidence is strong enough to reject the null. For the exam, focus on the intuition and on interpreting results rather than deriving formulas.

• Know how to use the financial calculator keys for PV, FV, N, I/Y, and PMT.
• Remember that NPV and IRR can rank projects differently when cash flow patterns differ.
• Use expected value and standard deviation together when comparing investments.
• Distinguish the null hypothesis from the alternative hypothesis in examples.

TVM drill: memorize FV = PV x (1 + r)^N and practice present value, future value, annuities, and NPV. Set calculator mode before solving and write the formula first.

Level 1 economics combines microeconomics and macroeconomics. The most tested micro topics include demand and supply, elasticity, consumer behavior, and the characteristics of perfect competition, monopoly, oligopoly, and monopolistic competition. These concepts explain how prices and output are set in different market structures.

Macro topics focus on aggregate demand and aggregate supply, the business cycle, inflation, unemployment, monetary policy, fiscal policy, and foreign exchange. Expect questions that connect policy changes to their effects on growth, interest rates, and currency values.

Financial reporting analysis starts with the three core statements: the balance sheet, the income statement, and the cash flow statement. The balance sheet shows assets, liabilities, and equity at a point in time; the income statement shows revenues and expenses over a period; and the cash flow statement classifies cash flows into operating, investing, and financing activities.

Revenue recognition follows the core principle of recognizing revenue when goods or services are transferred to the customer and the amount can be measured reliably. Ratio analysis then turns statement data into comparisons: the current ratio uses current assets / current liabilities, while solvency, profitability, and efficiency ratios each answer a different question about company performance.

• Link supply and demand shifts to changes in equilibrium price and quantity.
• Remember that monetary policy affects interest rates and aggregate demand, while fiscal policy changes government spending and taxes.
• Know the three cash flow classifications: operating, investing, and financing.
• Use the DuPont framework to break return on equity into profit margin, asset turnover, and leverage.

Framework drill: connect supply and demand, elasticity, and market structures; then map the balance sheet, income statement, and cash flow. Know the differences between IFRS and US GAAP.

Corporate issuers raise capital by choosing between debt and equity. Debt creates a contractual obligation to pay interest and principal, while equity gives shareholders residual ownership claims. The mix of the two is the capital structure, and managers weigh the lower after-tax cost of debt against the higher financial risk created by leverage.

Portfolio management connects securities to client goals through expected return and risk. Diversification reduces unsystematic risk because imperfectly correlated assets offset one another, while systematic risk remains and is measured by beta. Return expectations combine the risk-free rate with a premium for market exposure.

Fixed income starts with bond pricing. A bond's price is the present value of promised coupons and principal discounted at the market yield, so higher yields mean lower prices. Duration estimates the approximate percentage price change for a 1% yield move; longer maturity and lower coupons generally raise duration.

Equity markets include primary issuance and secondary trading. Valuation basics compare intrinsic value with market price using dividend discount, price multiple, and free cash flow approaches, and a buy signal appears when estimated value exceeds current price.

• Compare debt and equity financing using capital structure ratios such as debt-to-equity.
• Distinguish systematic risk from unsystematic risk and explain diversification benefits.
• Price a bond by discounting coupons and par value, then apply duration to estimate price changes.
• Use market structure and valuation concepts to judge whether a stock is undervalued.

Product drill: compare debt and equity, understand WACC, and connect duration, convexity, and bond pricing. For portfolio, use expected return, variance, and diversification.

A realistic review window of 4–6 weeks keeps material fresh without sacrificing depth. Split the calendar into consolidation in weeks one and two, intensive practice and mocks in weeks three and four, and targeted repair plus final review in the last week.

Spaced repetition turns short, frequent sessions into durable memory. Review a topic after one day, again after three days, and again after a week, using active recall instead of passive rereading. This rhythm lets high-weight areas such as ethics appear more often.

Mock exams reveal performance under time pressure. Take a full mock after the first two weeks, score it by topic, and use the results as a weak-area diagnosis. Review every mistake, including questions you guessed correctly.

Time management begins with answering easy questions first, flagging harder ones, and returning later. On exam day, leave margin to revisit flagged items. Reserve the final 24–48 hours for ethics, formulas, and summary sheets rather than new material.

• Build a 4–6 week calendar with consolidation, practice, and repair phases.
• Schedule spaced reviews at one-day, three-day, and one-week intervals.
• Use mock results to identify weak areas and repeat those topics.
• Pace yourself with flagging and return strategies under timed conditions.
• Finish with an ethics and formula review before exam day.

Six-week plan: weeks 1-2 consolidate topics; weeks 3-4 practice and mocks; week 5 target weak areas; week 6 final review. Review after one, three, and seven days.