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How do we do Exchange Rate Calculations?

Posted on by Imarticus Learning

Exchange rates, the price of one currency in terms of another, are the linchpins of the global economy. They dictate the cost of imports and exports, influencing trade balances, investment flows, and overall economic health. A deep understanding of exchange rate dynamics is essential for businesses, investors, and policymakers alike.

An exchange rate is fundamentally the price at which one currency can be converted into another. For instance, the USD/INR exchange rate indicates the number of rupees required to purchase one US dollar. These rates fluctuate constantly, driven by a complex interplay of economic, political, and psychological factors.

The importance of exchange rates extends far beyond currency conversion. They serve as a barometer of a nation’s economic health. A strengthening currency can boost purchasing power but may hinder exports, while a weakening currency can stimulate exports but increase import costs. Additionally, exchange rate volatility can create uncertainty for businesses and investors, impacting decision-making and risk management.

We will learn all about exchange rate calculations in this article, from their fundamental concepts to real-world applications. We will explore how exchange rates are determined, calculated, and utilised in various financial contexts. We will also examine advanced topics such as exchange rate forecasting and the impact of currency crises.

The Basics of Exchange Rates

Understanding the fundamental concepts of exchange rate quotations is crucial for navigating the foreign exchange market. Exchange rates are generally represented as a pair of currencies. The first one is the base currency, and the second currency is referred to as the quote currency. For example, in the USD/INR pair, the US dollar is the base currency, and the rupee is the quote currency. This means the exchange rate indicates the number of rupees required to purchase one US dollar.

To facilitate currency exchange, market participants utilise bid and ask prices in their exchange rate calculation method. The bid price is the rate at which a financial institution is willing to buy a currency, while the ask price is the rate at which they are willing to sell it. The difference between these prices is the bid-ask spread, which represents the dealer’s profit. Exchange rates can be quoted directly or indirectly. Direct quotes express the domestic currency’s value in terms of foreign currencies, while indirect quotes express the foreign currency’s value in terms of the domestic currencies.

Several key terms are essential for comprehending exchange rate calculations and exchange rate dynamics. Appreciation refers to an increase in a currency’s value relative to another, while depreciation signifies a decrease. Devaluation is a deliberate action by a government to reduce the value of its currency. These terms are fundamental to understanding how exchange rates impact economic variables.

How Exchange Rates Are Determined

Exchange rates are dynamic entities, fluctuating in response to a huge list of economic, political and psychological factors. Two primary systems govern exchange rate determination: floating and fixed exchange rates. These are essential in exchange rate calculations.

Floating exchange rates, prevalent in most major economies, are determined by the market forces of supply and demand. The value of a currency appreciates when demand exceeds supply and depreciates when supply surpasses demand. Several factors influence these supply and demand dynamics. Interest rates, inflation rates, trade balances, and economic growth prospects significantly impact currency values. A country with higher interest rates tends to attract foreign investment, increasing demand for its currency and appreciating its value. Conversely, high inflation erodes purchasing power, leading to currency depreciation. A trade surplus, where exports exceed imports, strengthens a currency, while a trade deficit weakens it.

In contrast to floating exchange rates, fixed exchange rates involve a government or central bank pegging a country’s currency to another currency or a basket of currencies. This system aims to maintain a stable exchange rate, reducing currency volatility. However, maintaining a fixed exchange rate requires significant intervention in the foreign exchange market, which can be costly and unsustainable.

A hybrid system, known as managed floating, combines elements of both floating and fixed exchange rates. Central banks in countries with managed floating exchange rates intervene in the foreign exchange market to influence currency values, smoothing out excessive volatility or preventing sharp depreciations.

Exchange Rate Calculations

The foundation of foreign exchange transactions lies in accurate exchange rate calculations. The basic exchange rate formula involves multiplying the amount of one currency by the applicable exchange rate to determine its equivalent value in another currency. For instance, to convert US dollars to rupees, one multiplies the dollar amount by the USD/INR exchange rate.

Cross rates enable currency conversions between two currencies without a direct exchange rate quotation. By utilising a common third currency in the exchange rate formula, often the US dollar, cross rates can be calculated. For example, to determine the INR/JPY exchange rate, one can multiply the INR/USD rate by the USD/JPY rate.

Triangular arbitrage is an exchange rate calculation method that exploits discrepancies in exchange rates across different currency pairs. By simultaneously buying and selling currencies in multiple markets, traders can profit from price differences. However, such opportunities in exchange rate calculations are rare and require swift execution.

Exchange rate calculations for financial instruments, such as options and futures, involve more complex formulas and considerations. These derivatives derive their value from underlying currency movements, and their pricing incorporates factors like volatility, time to maturity and interest rates.

Exchange Rate Calculation Formula

As we discussed, the fundamental formula for calculating currency conversions is straightforward. It simply involves multiplying the amount in the base currency by the exchange rate to obtain the equivalent value in the quote currency. Conversely, dividing the amount in the quote currency by the exchange rate yields the equivalent value in the base currency.

Mathematically expressed:

Amount in Quote Currency = Amount in Base Currency * Exchange Rate

Amount in Base Currency = Amount in Quote Currency / Exchange Rate

It is essential to note that exchange rates fluctuate constantly due to various economic factors. Therefore, the calculated values are accurate only for the specific exchange rate at a particular point in time.

Real-World Applications of Exchange Rate Calculations

Exchange rate calculations are indispensable in the global economy, with far-reaching implications for individuals, businesses, and governments. International trade is fundamentally intertwined with exchange rates. Exporters and importers must carefully consider currency fluctuations in their exchange rate calculation method of choice to optimise pricing, profitability, and competitiveness. Invoicing in a specific currency can mitigate exchange rate risk, but it also requires a deep understanding of potential currency movements.

Hedging foreign exchange risk is crucial for businesses operating in multiple currencies. By utilising financial instruments like forward contracts, options, and futures, companies can protect themselves from adverse exchange rate movements. Effective hedging strategies require accurate exchange rate forecasts and a comprehensive risk management framework.

Currency conversion is a familiar aspect of exchange rates for travellers. Calculating the cost of goods and services in foreign currencies, exchanging money at optimal rates, and understanding exchange rate fees are essential for budget planning and financial management. Remittances, the transfer of money across borders, rely heavily on exchange rates. Remittance services must accurately convert currencies to ensure fair and competitive rates for customers.

The profitability of businesses with international operations is significantly influenced by exchange rates. A weaker domestic currency can boost export competitiveness but increase the cost of imports. Conversely, a stronger currency can improve purchasing power but hinder export performance. Effective management of exchange rate risk is vital for maintaining profitability and financial stability.

Advanced Exchange Rate Calculations

Beyond the fundamentals, exchange rate analysis delves into sophisticated theories and models that offer deeper insights into currency dynamics. Purchasing Power Parity (PPP) is a macroeconomic theory that suggests exchange rates adjust to equalise the prices of identical goods and services across different countries. While PPP is a long-term concept, it can provide valuable insights into currency overvaluation or undervaluation.

Interest rate parity is a financial theory that links interest rate differentials between two countries to their exchange rate movements. It posits that the expected change in the exchange rate should offset the interest rate differential. This theory is instrumental in understanding the impact of monetary policy on exchange rates.

Exchange rate forecasting is a complex endeavor, involving the analysis of economic indicators, political events, and market sentiment. Various models, including econometric models, technical analysis, and fundamental analysis, are employed to predict future exchange rate movements. However, it’s essential to recognise that exchange rate forecasting is inherently challenging due to the multitude of factors influencing currency values.

Currency crises, characterised by rapid and destabilising depreciations, can have severe economic consequences. Understanding the causes of currency crises, such as speculative attacks, balance of payments imbalances, and loss of confidence, is crucial for risk management. Contagion effects, where currency crises spread to other countries, highlight the interconnectedness of the global financial system.

Exchange rate regimes, the framework governing a country’s exchange rate policy, significantly impact economic stability and trade. Different regimes, such as fixed, floating, or managed floating, have varying implications for monetary policy, capital flows, and economic growth. Analysing the strengths and weaknesses of different exchange rate regimes provides valuable insights into a country’s economic strategy.

Tools and Resources for Exchange Rate Calculations

The digital age has provided a plethora of tools and resources to facilitate exchange rate calculations and analysis. Online currency converters are readily available, offering real-time exchange rates and the ability to convert between multiple currencies with ease. Financial calculators, often integrated into online banking platforms or financial websites, provide more advanced features, including calculations for foreign exchange transactions, interest rate conversions, and currency swaps.

Foreign exchange trading platforms, used by both individuals and institutional investors, offer access to detailed market data, including historical exchange rates, bid and ask prices, and trading charts. These platforms also provide tools for executing foreign exchange trades and managing currency risk.

Data providers specialise in collecting and distributing financial data, including exchange rates. Their services range from real-time data feeds to historical datasets, enabling in-depth analysis and research. Excel, a widely used spreadsheet software, offers various functions and formulas for performing exchange rate calculations, creating custom worksheets, and analysing currency trends.

Wrapping Up

Understanding exchange rates and exchange rate calculations is paramount in today’s interconnected global economy. From individuals planning international travel to multinational corporations managing foreign exchange risk, a grasp of exchange rate dynamics is essential. By comprehending the fundamentals, calculation methods, and real-world applications, individuals can make informed financial decisions.

While exchange rates are influenced by a multitude of factors, technological advancements have made it easier to access information and perform calculations. Online tools and resources provide real-time data, currency conversion capabilities, and analysis tools. However, a deeper understanding of underlying economic principles is crucial for effective exchange rate management.

As the global economy continues to evolve, exchange rates will remain a dynamic and influential force. By staying informed about currency trends, economic indicators, and geopolitical events, individuals and businesses can navigate the complexities of the foreign exchange market with greater confidence. If you wish to become an expert in forex, financial analysis and other finance concepts, enrol in Imarticus Learning’s Chartered Financial Analyst course. This CFA course will teach you all the skills and concepts you will need to become an expert financial analyst.

Frequently Asked Questions

What is an exchange rate?

An exchange rate is the price of one currency in terms of another. It determines the value of a country’s currency relative to other currencies. Exchange rates fluctuate constantly due to economic, political, and market factors.

Why are exchange rates important?

Exchange rates significantly impact global trade, investment, and tourism. They affect the cost of imports and exports, influencing a country’s balance of payments. Fluctuations in exchange rates can create opportunities and risks for businesses and individuals.

How are exchange rates determined?

Exchange rates are primarily determined by supply and demand in the foreign exchange market. Factors such as interest rates, inflation, trade balances, and political stability influence currency values. Central banks can also intervene in the market to manage exchange rates.

What are the main types of exchange rate regimes?

There are three main types of exchange rate regimes: fixed, floating, and managed float. A fixed exchange rate is pegged to another currency or a basket of currencies. A floating exchange rate is determined by market forces. A managed float allows for some government intervention to stabilise the currency.

CFA Certifications: Advantages & Disadvantages

Posted on by Imarticus Learning

A Chartered Financial Analyst (CFA) is an impressive professional title to hold that is not just respected in the world of finance and investment, but CFA certifications can open doors to some high-paying jobs as well. However, the road to your dream job will be filled with challenges and you will be required to prove your mettle in the cut-throat world of finance. 

If you are also dreaming of becoming a Chartered Financial Analyst, then this article will help you understand how CFA certifications can prove to be beneficial in your professional journey and what the limitations or disadvantages they can have for you. 

CFA Certifications – Overview

CFA certifications offer a tailor-made, in-depth, and comprehensive syllabus that is designed for future financial specialists and prepares them for the unpredictable world of investment and advisory services. A CFA professional holds expertise in key financial areas that include portfolio management, investment consulting, financial research, and risk management. To qualify for CFA status, candidates need to have a bachelor’s degree and also 4,000 hours of professional experience. The candidates also need to pass 3 exams to test their financial and investing knowledge. 

CFA Certifications- Advantages and Disadvantages

It is true, that CFA can give you a leg up when it comes to job as well as salary prospects but there are still some factors to consider. Before you start thinking about how to become a CFA, you need to analyze the pros as well as cons carefully. Below, is a list of advantages as well as disadvantages of CFA certification.

Better Job Prospects and Salaries

CFA certification is an impressive educational as well as professional addition to your resume, which means it opens up doors to better job prospects in the finance industry. Everyone in the finance sector understands the time and dedication required to achieve a CFA level which means hiring managers know that you are capable and have the analytical skills to handle high-ranking jobs. Moreover, as a CFA chart holder, you are in a position to negotiate a higher salary for yourself. 

Time- Efficient and Cost- Effective than an MBA

It might come as a surprise, but pursuing a CFA may be much more economical than some Master of Business Administration (MBA) programs. A CFA program can provide you with the full spectrum of investment-related education, which can prove to be beneficial in your journey toward a successful career. CFA programs can also prove to be quite time efficient as well, because they are self-study programs, allowing you to hold a job even when you are pursuing the certification course. This is something that is not possible with a lot of MBA programs as they may require you to leave your job and commit on a full-time basis.

Better Global Recognition

CFA qualification and certification are recognized in many countries. This means you get increased job mobility if you want an international financial career, opening doors to jobs worldwide that require a CFA charter. 

Networking Opportunities 

When you qualify for a CFA charter, you also become a member of the CFA institute, which means you build your network with professionals who hold several investment-related jobs. Moreover, this is a global programme, and CFA’s also got a chance to build a truly international network as well. 

CFA Certifications- Disadvantages

Requires Significant Time

If you are planning to become a chartered financial analyst, understand that you will be required to commit a significant amount of time. You will need to put in around 900 hours of self-study on 10 topics. Apart from that, to become a CFA charter, you must show 4,000 hours of qualified experience over three years. Therefore, before you pursue this programme ensure that you are ready for this type of long-term commitment. 

Credentials Won’t Guarantee a Successful Career

As with any certification or professional qualification, CFA is not a guarantee that you will be successful or that your job will be everything that you have dreamed of. Indeed, a CFA can help you build a successful career, but there is no guarantee that it will happen only based on a CFA certification and other factors also play an important role in propelling your career. 

The Bottom Line

Undoubtedly, CFA certifications can open more opportunities in the world of finance and can land you some amazing, high-paying jobs. However, you need to remember that your decision can affect your life significantly. Therefore, analyse the advantages as well as limitations carefully and then make your decision.

If you are set on making a career as a Chartered Financial Analyst, then Imarticus Learning can help you kick-start your journey through their well-curated CFA Program. 

A Quick FAQ to the CFA Charter

Posted on by Imarticus Learning

No doubt you have heard of the Fun Facts You Didn’t Know about the CFA Exam Chartered Financial Analyst Program (CFA), the most globally recognized and respected investment management credential in the world. In this blog we answer some questions regarding what it costs, if you’re eligible, and how much time you need to put aside to give it a good shot.
What is the CFA?

The CFA is a credential as well as a passport to the largest club of investment professionals in the world. Being a charter member means many regulatory agencies will offer waiver from licensing exams, graduate programs give you a waiver of the GMAT and many financial and investment-related certification organizations grant waivers from qualifying exams or continuing education requirements.
Because the CFA curriculum is incorporated into more than 300 business schools around the world, you are essentially learning what is taught in some of the best schools in the world. And the charter is often a prerequisite to many prestigious jobs in Investment Management.
How does one become a CFA Charter Holder?
Here’s the thing. It’s not just the passing of an exam. You cannot actually call yourself a CFA without being a CFA Charter Holder. The CFA requires you to do 4 things before you can become a CFA charter holder.

  • You need to agree to follow the CFA Institute Code of Ethics and Standards of Professional Conduct. This is why Ethics and Professional Standards comprise 15 percent of the Level 1 exam.
  • Pass the CFA Program exams for Levels I, II, and III. Watch this space for in depth posts on Level 1, Level 2 and Level 3 exams.
  • Have four years of qualified work experience in investment decision-making. This means having 48 months of experience in Investment Management that can be accrued either before, during or after the exam. The work experience is not a pre-requisite for the exam itself.
  • Become a regular member of CFA Institute and apply for membership in a CFA member society. Watch this space on a dedicated post to becoming a member of the CFA Institute.

What Jobs does it prepare you for?
Where do people land up after they do the CFA? Well here’s the break up. A majority of them go into Investment Management, which is what the course is geared towards. 23 percent become portfolio managers, 16 percent become Research Analysts, while the rest are distributed almost equally across Risk Management, C level positions, consultants, corporate financial analysts and financial advisory.
How many levels do I need to pass to get the CFA?
There are three levels and exams are held annually, biannual for Level 1.

  • Level I tests your knowledge of the ethical and professional standards and the exams consists of basic knowledge and comprehension questions focused on investment tools; some questions will require analysis.
  • Level II tests how you apply those standards to situations analysts face and emphasizes more complex analysis, along with a focus on valuing assets.
  • Level III tests how you apply the standards in a portfolio management and compliance context and require synthesis of all the concepts and analytical methods in a variety of applications for effective portfolio management and wealth planning.

All exams are in English and are held in June. Level 1 is also held in December. Check the CFA website for exact dates.
How much does it cost?
There is a one-time enrollment fee of $450 with a two-day refund policy.
If you want to register for the December Level 1 exam, you will pay a standard fee of $860 dollars if you register by 17th August and $1260 if you register by 14th September. If you plan to do it next year, then you can pay $650 if you register early.
In total, the three levels including one-time enrollment fee works out to $2400 if you register early every time, $3030 if you register normally.
Post passing all three levels, becoming a member of the CFA charter (required for you to actually use the CFA designation) will require you to pay $275 annually to the CFA institute and your local charter.

CFA Program – All You Should Know About CFA Certification

Posted on by Imarticus Learning

CFA Program is an expert accreditation offered by CFA Institute to Investment and Financial experts. In the wake of finishing and passing the CFA Program one will connect scholarly theory, assess current industry rehearse, and learn moral and expert guidelines to give a solid establishment of cutting edge speculation investigation and true portfolio administration aptitudes.
You are qualified in the event that you are in the last year of your single man’s program or as of now have a four year certification, or have proficient working knowledge that aggregates up to 4 years. The following is the CFA qualification criteria course in India.

  • Current MBA understudies/MBA wannabes
  • B Com/M Com understudies
  • CA aspirants
  • IT experts

CFA Course is especially known as Chartered Financial Analyst Course, which is an affirmation offered to the general population who have a place with the field of bookkeeping and back keeping in mind the end goal to connect up the hole amongst hypothetical and pragmatic points of view. The accreditation is in charge of giving its learners the speculation and administration abilities under the leader of fund. CFA is a universally perceived accreditation which secures ones future as far as splendid extension and fruitful profession. There are sure tips said underneath with the assistance of which the CFA certification can be effectively finished:

Sort out Yourselves:

For finishing the course on time effectively, one must sort out himself or herself comprehensive of his or her schedules. CFA course requires no less than 250 hours of autonomous examination which implies one should in any event ponder 12 hours per week. Subsequently, legitimate calendar ought to be made by the person who intends to get this confirmation deferentially. Following are the sure activities which should be possible by the learners keeping in mind the end goal to arrange his or her normal according to the prerequisites of the course:

Begin Studying Early in the morning

Observe all in all syllabus before beginning

Outline an objective arrangement, enrolling your objectives

Build up an arrangement to amend the entire course

Make a productive timetable

Before beginning the investigation, a productive and scholarly timetable ought to be made by the understudy that must be taken after totally by him or her as it will choose the eventual fate of the understudy. While arranging, following focuses ought to be remembered:

Must know the results of all lessons already

Go for sticky notes and schedules for reminding reason

Separate between the subjective and quantitative examination

Eat healthy, remain sound

Go for a Recap of the entire course

In the wake of having a total and nitty gritty investigation with respect to the entire course, one must go for the survey of the entire course through imperative focuses. This will assist a considerable measure amid the exam time!

The Career Path and Salary for a CFA holder

Posted on by Imarticus Learning

CFA or Certified Financial Analyst is considered as a very prestigious credential when it comes to the world of finance. Those professionals who are able to clear all the levels of this exam are ushered into this charter, which consists of world-renowned finance professionals and lucrative career opportunities. It is a common belief that all those finance aspirants, who are looking to pursue CFA, are usually looking to earn big in their respective careers. While this may be the case, there are certain things that every CFA aspirant must know about. Firstly, that this examination, is really a tough nut to crack and this by no means is meant in a demotivational way. Any candidate must do a thorough research about this examination, before attempting it. This research must include the amount of time one must spend studying, as well as the various opportunities and salary trends in this field.

According to a certain statistical data of the year 2014, it was concluded that all the charter holders, or those who crack the CFA exam, usually opt for a career in Portfolio Management. This is mainly because it is considered to be the highest paying career option herein and close 22% of the applicants, chose to pursue their career in this field. While 15% of the CFA holders opt to become a Research Analyst, about 7% opt for Chief Executives, Consultants (6%), Risk Managers (5%), Corporate Financial Analysts (5%), Relationship Managers (5%) and Financial Advisers (5%). So if you are a finance aspirant looking to crack this prestigious examination, the four top positions that you should look at as career options, would be Portfolio Manager, Research Analyst, Chief Executive and Consultant. Let’s move on to the employers, who are known to hire the cream of CFA holders, across the world. These employers are most often top investment banks like JP Morgan Chase, PwC, HSBC, Bank of America Merrill Lynch, UBS, Ernst & Young, RBC, Citigroup, Morgan Stanley, Wells Fargo and so on.

Studies show that about 60% of the CFA charter holders are usually residents of the United States of America. While according to the CFA Society of Chicago USA, the median compensation, for any fresh graduates and CFA charter holders would range anything from US$215,542 annually to about $ 154,025 per annum. Whereas, on the other hand, for someone who is just a graduate and does not hold a CFA charter, the salary would be anything around or more than US$ 85,875 per annum. Apart from USA Europe also pays these charter holders handsomely, thus a CFA charter holder would earn anything between $124,000 per annum. While it is the country of Australia, that is known to pay the highest salaries for CFA holders, while in India, it is the city of Bangalore, which pays the most.
There are a number of people, especially in India, who attempt to clear this examination every year. While most of them choose to get trained professionally, from Imarticus Learning, to better their chances of entering this coveted charter.

CFA Certification Provides A Gateway To Million Possibilities

Posted on by Imarticus Learning

In the world of Finance, the CFA certification or the Chartered Financial Analyst certification is a very well-known and prestigious certificate to hold. Those who are able to crack these exams, are popularly known as Charter Holders and become a part of the exclusive organizations and are able to get entry, without any prior entrance examinations. Apart from the exemplary job opportunities, there are amazing salaries that are offered to the professionals, who crack all three levels of this examination. Due to the fact that even a working professional can attempt to give this examination, as well as the considerable affordability of it, have resulted into a lot of people opting to attempt the same.
Through a CFA certification, a candidate can find a means to not only boost their management skills, but also ace investment analysis. This examination usually helps a candidate, cover industry practices, which include both ethical as well as professional standards in addition to academic theories. Anyone who is looking to take a shot at cracking the three levels of this examination has to well versed with a number of concepts like, Quantitative methods, Economics, Financial Analysis, Portfolio Management, Equity, Fixed Income, Derivatives, Alternate Investments and so on. The three levels of this examination, are devised in such a way as to inculcate the aforementioned concepts, in a better way. For a CFA holder, the gates in terms of job opportunities are wide open, for they can choose from a number of fields like research, analysis, accountancy, corporate finance, consultancy and relationship management; as the field of their expertise.

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Apart from the rewarding job prospective, this exam ensures that a charter holder is able to cultivate broad knowledge in terms of investment skills as well as decision-making tendencies, up to the quality of the global financial industry. As the program and the examination, both are entirely based on finance, they encourage a candidate to shine really well through a career in Investment Banking. If and when a candidate chooses a program, to help and assist them in cracking this prestigious exam, these programs are generally dependent on extensive global practice analysis processes, which are basically dependent upon inputs, discussions, surveys as well as reviews, which are all curated from esteemed CFA charter holders.
The CFA program has already been at the receiving end of a number of accolades, including that of the best course, which goes on to provide a great amount of quality, in a profession like Investment Banking. Being a charter holder, not only opens up a million, lucrative possibilities but also ensures that the recipients are well equipped to be on a sub-par level when it comes to skills required for Investment Analysis worldwide.

Loved reading this? Try these blogs as well –
CFA Level 1: How To Crack It?
Salary Trends Of A CFA Analyst
5 Must Know Things about CFA

CFA Level 1: How To Crack It?

Posted on by Imarticus Learning

The CFA Program is the most distinguished program, to get a qualification in the world of Finance. The credential that is offered by this program, offers a great variety of choices for finance professionals, in the in the field of investment banking. The designation is granted by the CFA institute and is mainly a great career boost for those working in the Investment industry. Apart from being highly recognized throughout the world, anyone who is able to crack the exam, is given due prestige and is recognised among the most dignified of circles across the finance industry.
This program is essentially divided into two levels and has a set eligibility criteria, as to which candidate in particular can attempt the exam. Anyone with a certain amount of professional experience can give this examination including, current MBA students, B.Com and M.Com students, CA aspirants, IT Professionals and so on. A professional who has cracked this exam, is known as a CFA Charter holder. These Charter holders are believed to have a strong foundation, in the field of advanced investments as well as excellent portfolio management skills. This exam is like a getaway to the immense possibilities that the world of Investment Banking has to offer a candidate. This is mainly the reason why a lot of finance professionals attempt this exam every year.
Going into the basics of this examination, it consists of a series of levels, in a more sequential pattern; which a candidate must crack so as to become a charter holder. There are three levels and a candidate is required to clear all the three levels in the duration of about 2 years. While this credential has a great validation globally, in India it is used as a yardstick to measure the efficiency and integrity of a finance professional. Top Investment banks here, look for professionals with this meritorious credential. As amazing as the benefits of being a charter holder sounds, there is a rigorous process one has to undergo to achieve it. Many students in India sit for this intimidating examination and due to the lack of a proper plan, tend to give a very abysmal performance. This basically happens due to the fact that most of the CFA aspirants find the examination to be very difficult to crack. If you have a proper plan in place, there are very few chances of you finding the examination impossible to crack.
Lets talk about CFA Level 1 in specific here, this level basically consists of wide range of topics related to finance and rarely goes in-depth for any topics. While studying aimlessly will get you very lackluster results, it bodes really well to set up a study plan. While a lot of candidates choose to make their own study plans and work their way towards the exam, which is held in December. Most of the professionals feel the discomfort of lack of any proper guidance. There has been an increasing trend of institutes, which help a candidate in cracking this prestigious exam, Imarticus Learning have a unique mentor run program, where a mentor who is also a charter holder is assigned to a student, to help them clear the exam. They also have a very innovative policy of refunding your deposit if you aren’t able to clear the same.

How to pass the CFA in your second attempt?

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Before we tackle that question, let’s perhaps try and understand why you failed in your first attempt. Did you do everything you could? Here are some of the main reasons why people fail. 

  1. They don’t study hard enough – Increase the study hours – Everyone knows you need 300 hours to study for the level 1 CFA. The CFA institute recommends you put in a minimum of 300 hours of study. You think you studied hard enough but you probably didn’t. When they mean 300 hours, they mean every minute of that is spent studying. In a two-hour study period, most people take half an hour to sink into the material and a lot of time spent on social media. Most people increase study time to 400 hours. If you take our CFA course, we provide you an additional 120 hours of study, which ensures that you put in the time.
  2. What was your exam strategy? – The pass score for the CFA is 70%. There are varieties of exam strategies, which one did you follow? For instance, did you make sure you answered all the questions you knew to be absolutely correct? For instance if you focus on answering 50% of the questions you have built a foundation for a good score.
  3. What materials did you rely upon? You cannot just depend on CFA material. This is why it’s important to do course like the Imarticus CFA course where we give you study material that builds upon the material you receive from CFA. The CFA books can be overwhelming in the information they provide. Secondary sources will help distill the key learning’s so that you know the fundamentals and don’t lose sight of the forest for the trees.
  4. What topics did you focus upon? Pay attention to all topics but make sure you study ethics – not last minute, and put in extra work in fixed income and portfolio management, traditionally the areas most people falter on.
  5. What was your study plan? This is especially important if you are working. How do you actually intend to get in 5 hours of uninterrupted study? Did you let your boss know that you couldn’t be put on any special projects? This means chalking out the next 6 months to the hour if you will and keep a 30% time buffer so that you compensate for that last minute emergency which means you lose out on study time.
  6. Did you get enough sleep? Sleep is one of the main reasons why people fail. They attempt the exam with a tired mind. And sleep deficiency adds up. So a good nights sleep before the exam is not sufficient. This is when your study plan comes into play. Your study plan has to allow for rest over and above any other extra curricular activities. So chuck the social media, the tv and anything else. Sleep and study.
  7. Did you practice enough? Most people buckle under the time pressure during the test. You do fine at home, at the perfect temperature, without the added pressure of delivering. You have to work under exam pressure. This is why the Imarticus CFA program is so popular. We give you 3 mock online tests and a 3000 sample question bank. But the most important is a actual simulated classroom test following exam conditions. This is key to understanding your weak areas.

For more details on the Imarticus Learning CFA program, visit https://imarticus.org/financial-analysis-prodegree/ or call us on 0226149595

5 Must Know Things about CFA

Posted on by Imarticus Learning

CFA or Chartered Financial Analyst is a designation, which figures as one of the most prestigious credentials in the world. Essentially divided into three levels, this exam is conducted by the CFA Institute, annually or biannually based on the level of the exam. There are a lot of candidates who strive to achieve this position every year. Here’s a list of 5 things that you must know before you sit for the exam.
What Works For One Doesn’t For the Other 
This holds true especially for the CFA exams, as there are a lot of people attempting them together. It is a practice in a lot of firms of asking their employees to register for the same immediately after they join in. As there are a lot of people attempting the exam, there is a lot of discussion as well. As is common, strategies and study plans are shared and sometimes the same plan is followed by two people. This is something that should be avoided, as a plan might work for one, but wouldn’t for the other. There are many reasons for it, some of which may be that some candidates might have already studied some concepts, study styles would be different and so on.
Only First Time Is the Charm
The exam is divided into three levels and all three of them differ in the level of difficulty. So that means if the first level of the exam might go a little easy, probably because of the candidate probably study more than what is required. This also doesn’t mean that if a person passes the first level with last minute studying, it won’t be the case with level 2. The toughest exam among the three levels is considered to be the level 2 exam by a lot of people. Giving a 100% each time and being consistent about it is what counts more.
Do Not Under/Over-Estimate the CFA Institute
Although it is the CFA institute which conducts the exam, it doesn’t necessarily mean that one must follow each and every word there. It does not bode well to draw theories about the particular concepts posted on their website. So if there have been a lot of postings about a certain topic, it does not necessarily mean that the topic will be tested. At the same time, it is also not right to never consider CFA institute or the study material available there.
Only One Type of Study Format Works
People are different thus different things work for different people. Similarly, different methods of study work for different people. Thus, even when it comes to study formats, some work for a certain person, while the others don’t work at all. It thus becomes very wrong to think that, only paper and pen are the two things that would work for someone. Various study formats exist, conventional like those of pen and paper and non-conventional like audio-visuals, flash-cards, anagrams, mnemonics etc. One must make use of every type of study format.
Revision Is the Key to Success
Cramming till the very last minute has never been able to help anyone. It is very important, especially when it comes to CFA exams, to keep aside a certain amount of time for reviewing and polishing oneself. It is very important to solve the previous year’s papers, which are easily available. It is also important to make sure that you solve as many problems as possible. Apart from that, mock tests are also required.
Imarticus Learning is a leading education institute, provides valuable training to aspiring candidates, who wish to crack the CFA exams.