How to memorise CFA formulas: understand them first, then make them automatic
A long list of formulas is the part of the CFA that looks most like memorising, and it is the part where memorising alone fails. The exam presents a situation and expects you to choose the right formula and apply it quickly. This guide gives a method that makes formulas automatic by learning them in the order that sticks: meaning first, then use, then speed.
Why rote memory is not enough
Level I asks 180 multiple-choice questions at about 90 seconds each, and the stems use wording such as "most likely" and "best described". A question rarely says "state the formula for duration". It describes a bond and asks which statement is most accurate, or how a price would change. If you can only recite a formula, you may not recognise when to use it. If you understand it, you can often rebuild a half-forgotten version on the spot. Higher levels lean even further on application.
Step 1: know what every symbol means
For each formula, write down in words:
- what each symbol stands for, and its units;
- what the result tells you;
- what happens to the result if each input rises.
A formula you can describe in words is far harder to misremember. For example, the DuPont breakdown of return on equity is a chain of ratios, each with a plain meaning. See DuPont analysis explained.
Step 2: attach each formula to a situation
For each formula, note when you would reach for it, and what mistake is easy to make with it. Examples from the guides on this site:
- Present and future values are set up from a timeline and the rate per period. See time value of money explained.
- Effective annual rate matters whenever compounding is more frequent than yearly. See effective annual rate and compounding.
- NPV and IRR can disagree for some cash flow patterns, which is a classic exam point. See NPV vs IRR.
- Duration and convexity estimate a bond's price change, and the estimate worsens for large moves. See duration and convexity explained.
Group related formulas so you see the pattern, rather than learning a hundred isolated items.
Step 3: practise on the exam calculator
Only the Texas Instruments BA II Plus and the Hewlett Packard 12C families are allowed in the exam. Do every calculation on yours from the first week, so that the keystrokes become automatic. See which calculator you can use. The finance calculators let you check an answer when you are stuck.
Step 4: test yourself with questions, not by rereading
Retrieval builds memory. After you learn a formula, answer questions that use it the same day, and read the explanation for every wrong option. A wrong answer often reveals a misused symbol or a skipped step. Keep a short list of those errors. See how many practice questions to do.
Step 5: revisit on a schedule
A formula learned in week two is half gone by week ten. Come back to it after a day, a week and a month, in short sets of questions and not by rereading the chapter. See spaced review.
Make your own formula sheet
Build a one-page sheet of the formulas you miss in practice, with a line on when each applies and the symbol you tend to confuse. Writing it is itself revision, and it is a quick review in the final days. The site also offers a printable formula sheet for Level I, with each symbol explained.
In the last week
Do not try to learn new formulas. Review your own list of the ones you still miss, and run timed mixed sets so choosing the formula is as practised as using it.
Common questions
Do I need to memorise every formula for the CFA exam?
You need to be able to apply the formulas the curriculum teaches, which in practice means knowing them well enough to choose and use them quickly. Understanding each one makes that much easier than reciting it.
What is the best way to remember CFA formulas?
Know what each symbol means, attach each formula to a situation, practise on your exam calculator, test yourself with questions, and revisit on a schedule.
Should I use flashcards for formulas?
They can help for recall, but pair them with questions that use the formula, so you also practise recognising when to use it.
Which calculator should I practise on?
The one you will use in the exam: the Texas Instruments BA II Plus or the Hewlett Packard 12C family.
Sources
- CFA Institute, The CFA Program: the exam format, the question style and the calculator policy.
Check the current exam format and calculator policy on the CFA Institute website.