Table of Contents
Table of Contents

What to Expect on the CFA Level II Exam

If you are reading this article, there's a very good chance that you've already cleared the CFA Level I exam and have started your preparation for the CFA Level II. While the Level I exam focused on the basic knowledge and comprehension of tools and concepts of investment valuation, Level II is all about the application of these concepts.

Level II goes more in-depth into investment management and portfolio concepts and tests your ability to apply these concepts to real-life scenarios. This article will help you understand the nuances of the CFA Level II exam.

Key Takeaways

  • The CFA Level II exam tests candidates on the application of investment valuation concepts.
  • Level II contains multiple choice questions that are grouped into mini-cases called item sets. 
  • There are 10 topics grouped into four areas: Ethical and Professional Standards, Investment Tools, Asset Classes, and Portfolio Management and Wealth Planning.
  • Candidates have six hours to complete the exam.

What's on the CFA Level II Exam?

What Is the CFA Exam?

The chartered financial analyst (CFA) professional designation is offered by the CFA Institute—a global association of investment professionals—to people who successfully complete its exam. The exam is comprised of a set of three tests that become increasingly difficult and more complex. Each test has a different set of concepts and questions the student must answer. The exams challenge students on their comprehension, knowledge, and analysis on a series of different topics like accounting, economics, ethics, money management, and security analysis.

The exam is typically offered every June at different centers around the world. For the latest updates on test dates, candidates should monitor the CFA website. Candidates are required to meet a minimum score to pass each level. Those who don't pass are provided with information compared to others who didn't pass. They are able to sit for the designation again.

Starting in 2020 the CFA Institute expanded exam options by offering more exam dates as well as computer-based exams.

Exam Structure

Similar to Level I, Level II also contains multiple choice questions. However, the questions are grouped into mini-cases called item sets. Each item set consists of a case statement followed by four or six multiple choice questions. There are a total of 21 item sets—10 in the morning session and 11 in the afternoon session. Candidates are required to use the information provided within each item set in the case statement to answer the questions.

Exam Details

Anyone who wishes to complete the exam must have a bachelor's degree or equivalent education and must have passed the CFA Level I exam. Test takers must also have three years' worth of qualifying work experience prior to taking the exam.

Candidates are given six hours to complete the exam. The cost to enroll varies annually—as does the passing score—and depends on when they enroll. Passing rates for the Level II exam on June 2019 were set at 44%. Exam results are usually provided to candidates within 60 days.

Exam Curriculum

For the Level I exam, the topic focus is on investment tools, with relatively less focus on asset valuation and portfolio management. For Level II, though, the topic focus shifts more toward asset classes, although the investment tools are still weighted rather high. In terms of learning, the Level II exam focuses on the application and analysis of concepts learned in Level I.

The curriculum consists of 10 topics that are grouped into four areas:

  • Ethical and Professional Standards
  • Investment Tools
  • Asset Classes
  • Portfolio Management and Wealth Planning

The following table shows the weightings of these topics and broad areas for the Level II exam.

Topic Area Level II
Ethical and Professional Standards (total) 10
Investment Tools (total) 30-60
Corporate Finance 5-15
Economics 5-10
Financial Reporting and Analysis 15-25
Quantitative Methods 5-10
Asset Classes (total) 35-75
Alternative Investments 5-15
Derivatives 5-15
Equity Investments 20-30
Fixed Income 5-15
Portfolio Management and Wealth Planning (total) 5-15
Total 100

Exam Topics

Let's take a brief look at each of these 10 topics.

Ethics and Professional Standards

This section covers the code of ethics, professional standards and the global investment performance standards. Ethics is one section that is equally important in all of the three levels. The questions will be aimed at the application of the seven standards in professional situations. Other important topics are the soft dollars and Research Objectivity Standards (ROS).

Quantitative Methods

You can expect about one to two item sets from the quantitative section. The case statement will most likely present data regression, and ask you to analyze and interpret the data. You may even be asked to calculate some key metrics based on the data provided.


Similar to the topic above, economics is also a small section in Level II. You can expect one item set for this topic. You need to have a good conceptual knowledge of economics, as many of these concepts can be tested along with other topics. One important concept is foreign exchange, and you are likely to be tested on the application of its concepts.

Financial Reporting and Analysis

Financial reporting and analysis represent a large portion of the exam. You can expect about four to five item sets from this section. The important concepts are accounting for inventories, accounting for long-lived assets, accounting for leases, inter-corporate investments, accounting for acquisitions, variable interest entities (VIEs), and financial reporting quality.

You are more likely to be asked item set questions based on a combination of these concepts. You need to learn the processes and principles and practice their application thoroughly. Understanding the nuances and differences in IFRS and U.S. GAAP is critical.

Corporate Finance

Corporate finance is an important but easy-to-handle subject. The concepts in corporate finance are linked with the financial reporting and equity sections. So, the questions may be combined with material from the other sections. The key concepts include capital budgeting, capital structure, dividend and repurchase policy issues, corporate governance, and mergers and acquisitions.

Portfolio Management

You can expect one or two item set questions from portfolio management. The material in this section is huge, and it may be wise to keep this section for the end. Remember that the portfolio management material will get deeper in the Level III exam, so it's a good idea to have a general understanding of concepts here. You will be tested on portfolio theory, market efficiency, and asset pricing concepts.

Equity Investments

Equities is an important section for financial analysts and you can expect about four to five item set questions from equities. There is a lot of material on equity analysis and valuation methods. Note that the equity section is heavy on formulas and you may be asked to perform formula-based calculations and interpretations.

Fixed Income

Fixed income is a small, yet important part of the exam that is quite similar to the corporate finance section. Given the recent financial crisis, this section has become even more important. You can expect one or two item sets on this topic. Like equity investments, fixed income is also heavy on formulas and some of the concepts are quite complex. Key concepts include credit analysis, term structure, bonds, mortgage-backed securities (MBSs), and their valuation.


This is a more challenging section and you can expect at least two item set questions from derivatives. The material covers futures and forwards, options, and swaps. Within derivatives, you should be familiar with currency forwards, interest rate futures and forward rate agreements. In options, you need to understand the options strategies and the models for pricing option contracts. In swaps, you should be able to interpret a swap transaction and figure out the cash flows to the parties involved.

Alternative Investments

This section covers asset classes other than equity and fixed income. The three asset classes, which are a part of the CFA curriculum, are real estate, hedge funds, and private equity. There will be one or two item sets questions from this section. This is a relatively easy section and can help you get that additional score without getting into complex stuff.

Try Our CFA Level 2 Quizzer

The Bottom Line

The CFA Level II exam is fairly difficult and asks you to apply concepts, rather than just understand them. So, it's critical that you spend time on practicing and taking sample tests while reviewing the areas where you are weak throughout your preparation. Best of luck on the exam!

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  1. CFA Institute. "CFA Exam Results and Pass Rates."

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