CFA Level III

CFA Level III examination emphasizes portfolio management and includes strategies for applying the tools and inputs in managing equity and fixed-income securities. Candidates must apply the knowledge and skills learned in Levels I and II to the portfolio management process, from estimating and analysing objectives, investor constraints, and capital-market expectations to making asset-allocation decisions. It consists of item set and essay questions and is offered in June only. The curriculum covers:

  • Corporate finance
  • Financial statements analysis
  • Ethical and professional standards
  • Quantitative methods
  • Economics
  • Analysis of financial instruments
  • Analysis of alternative investments
  • Portfolio management

Exam Questions Format:

The Level III examination uses the essay format in the morning, and the item set format, with 10 item sets, in the afternoon. The topic focus on Level III is on portfolio management. At Level III, the morning essay examination is 180 points and the afternoon item set examination is 180 points.

Essay Questions:

About the Level III Essay Questions-

The Level III essay examination is given in the morning session and has a maximum score of 180 points. The essay examination typically has 10-15 questions, and questions may have multiple parts. The points for each question and each question part are given in the examination.

Each essay question consists of one or more parts (A, B, C, etc.). Some parts will direct you to write your answer in a template. Instructions in bold print immediately following the question will direct you to the page number of each template. All other questions should be answered on the lined page(s) following the question. For these questions, label each part of your answer clearly (A, B, C, or i, ii, iii, etc.)

If you use all of the designated lined pages, extra lined pages are provided at the back of the book. To use these pages, place a check mark in the box at the bottom of the last page designated for that answer and label the extra pages with the appropriate question number.

The following are some general tips for Level III candidates on the essay exam:

  • The published guideline answers on past essay examinations are more complete and better written than actual examination answers that receive full credit.
  • Answers are graded only on content. They are not graded for language and style.
  • Use short phrases and bullet points to save time, but be sure your meaning is clear.
  • Handwriting is rarely so poor that the answer cannot be graded.
  • Points are awarded for direct answers to a question.
  • No points are awarded for general knowledge that is not responsive to the question.
  • Do not spend too much time writing an answer. This is particularly tempting when you know the topic well. Formulate a direct response to the command words, and use the amount of time allotted.

You should expect to encounter questions that you will not be able to answer correctly. There is a great deal of material to master and the questions are challenging. Standard setters and the Board of Governors (at all three levels) take account of examination difficulty in setting Minimum Passing Scores.

Essay Format Question Review:

The following are common reasons that graders give for poor candidate performance on the essay portion of the Level III:

  • Not responsive to command word list (list, define, etc.)
  • Answered a question they wish they had been asked instead of the question that was asked.
  • No work shown on a calculation question and the answer is incorrect.
  • Hedged on questions that asked for a recommendation and justification (e.g., recommended A, but justified B).
  • Neglected to answer part of the question (especially if a several part question). Note that you can still answer part E, even if you do not know the answer to part D.
  • Content area experts spent too much time on their area of expertise, leaving too little time for weak areas.
  • Providing more items or responses than requested. If a question asks for three factors, only the first three that you list will be graded