suyash1989

According to my research, one of the two things will be proven wrong for sure this time around:

1) 70% score is passing
2) Only 30% of test takers pass

Let me explain why. The reason has to do with 3 choices instead of 4 this time around. First let's analyze the old system. Take an average student Joe Smith who just barely passed in Dec 2008. He scored 70% (per cfa institute - the passing score) and was the 30th percentile of test takers (per CFA pass rate of 30%). Joe knew x number of questions positively and y number of questions he had no clue about. So he randomly guessed on y questions with a 25% chance of getting it right. This leads to two equations:

x + y = 240 (total number of questions equal 240)
and
x + .25 y = 168 (total score must equal 168 to pass)

Solving these two equations leads to values of x = 144 and y = 96

Now Joe has a twin brother, Bruce Lee (unrelated to the kung foo star), with equal intelligence who takes the test in June 2009. Let's say Bruce also knows 144 questions with certainty and 96 questions he has no clue about. How much will Bruce score?

x + .33y (because now the probability of getting the unknowns right is .33 not .25)

Plugging x = 144 and y = 96 in this equation, Bruce will score:

175.68 out of 240 which translates to 73.2% !!!

So the twin brothers of equal intelligence and ability with same number of questions right would have scored 70% and 73.2% correctly, in their respective tests.

This leads me to believe that either the CFA passing score of 70% will lead to more candidates passing than 30% of the total candidates. Or, if they only pass 30% of candidates, then the passing score will likely be higher than 70% (more like 73.2%).

Comments/suggestions?