CFA® Quantitative Methods

Summary, Syllabus, and Topics (L1, L2, L3)

CFA® Institute’s Quantitative Methods curriculum introduces the Time Value of Money (TVM) and probability concepts. TVM is a foundational principle in the quantitative part of the CFA exam that cascades into many other areas of the curriculum, such as equity investments, fixed income valuation, and corporate issuers.

TVM explores the relationship between time and value and how that relationship affects valuing assets or determining rates of return. For example, if you invest $100 today into a bank account that pays 5% effective annual interest, you will have $105 in a year. The 5% rate of return and the duration of one year are the factors that relate the present value of $100 to the future value of $105.

Of course, actual exam questions are more complex and may involve discounting or compounding a series of cash flows over many periods. Such questions may ask you to determine present value, future value, the discount rate, the size of the intermittent cash flows, or the length of time involved.

CFA Quantitative Methods has a significant role in the Level 1 exam and a slightly smaller role in the Level 2 exam. On the Level 3 exam, these foundational concepts are not tested directly. However, the material has a significant overlap with other topics in the curriculum.

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Quantitative Methods is one of the more difficult topics in the CFA Level 1 and Level 2 curriculum, since it is often the least familiar. Candidates who have not had much exposure to quantitative techniques and concepts may have a harder time with this topic.

The CFA Quant section is the most formula-driven and mathematical. It is also significant in the CFA exam at the first two levels, accounting for 12%of the exam at Level 1 and 5-10% of the Level 2 exam. But the knowledge really carries over into all sections of the curriculum, so candidates must understand the fundamentals of Quantitative Methods at Level 1. People learn quantitative ideas differently, but it’s always best to practice, practice, practice.

The best method, after reviewing the CFA Institute curriculum, is to adopt an active learning approach. But don’t just take our word for it. Give us a try and discover for yourself what it’s like to experience active learning with UWorld’s extensive Level 1 Qbank and with our Level 2 Qbank (expected September 2022).

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