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03/25/2013

Don’t Miss the Easiest 15 Points on the Exam!


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CFA Exam Prep

Want to know the easiest way to lose 15 points on the exam? According to Michael Maestas, CFA, CPA, it is showing up with only a beginner’s understanding of how to use the HP12C or TI BA-II calculator. He says the difference between being a novice and a power user can easily be worth that much.

Pssst! Turn It Over!

Here’s a tip that Michael didn’t learn until he was preparing for the Level III exam. Turn over your HP12C and what do you see? Those are keystroke instructions on how to do asset depreciation, bond math, time value of money, and mortgage amortization calculations. There are similar keystroke instructions on the back of the cover or on a little card for the TI BA-II calculator. Don’t lose these! And bring them with you to the exam. CFA Institute specifically says that these instruction cards are permitted in the exam. You shouldn’t miss a single point on any of these critical topics because you can have officially sanctioned instructions right in front of you.

Practice, Practice, Practice

To become a skilled HP12C/TI BA II user, throw away every other calculator you own and only study with your designated exam calculator. If you use the HP12C, become completely fluent with RPN (Reverse Polish Notation). Make sure you know the most common keystrokes, as well as the ones for critical financial and statistical functions like time-value-of-money. And then practice, practice, practice so you can churn out answers in seconds instead of minutes. That allows you to quickly move on to other the next question.    

Get the Book

These financial calculators are actually powerful little computers, with a lot of helpful functionality that is ignored by most candidates. In fact, it’s even possible to calculate option prices with Black Scholes with these calculators (though beyond the scope of the exam). The advanced financial and statistical functions are spelled out in the instruction manual that came with your calculator. Lost it?  The manuals are available online: HP12C and TI BA II

Get the right one!

Many candidates ask which calculator to buy. It doesn’t matter, but pick one and stick with it. The HP12C is pricier ($60 vs. about $17), but is a much heavier duty calculator, and many people swear by the simplicity of RPN method. Whatever you do, make certain that your calculator is one of the officially sanctioned CFA Institute versions. No sense having an overzealous exam monitor confiscating your ultra-rare blue-anodized “20th Anniversary Edition” because he’s never seen it before and it is specifically not on the list. Check CFA Institute’s calculator guidelines to make sure you have the right version.

Keep it Powered Up!

Finally, don’t risk running out of power in the middle of the exam. Put in a new set of batteries before the exam and bring an extra set just in case. CFA Institute also permits bringing a tiny screwdriver to open up the TI BA-II battery port.  

Michael Maestas, CFA, CPA is a Managing Director, Alternative Investments for Charles Schwab in San Francisco. He is an adjunct professor in Equity Valuation & Advanced Financial Statement Analysis for the University of San Francisco’s Masters of Financial Analysis Program and has taught the Financial Statement Analysis sections at Level I and II in a CFA Review program since 2007.

–Linda Lam

Linda Lam has worked with a candidate review program since 2000.

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