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CFA Level II · Paper 1

CFA Level II Exam: Format, Topics and Study Plan

The CFA Level II exam tests whether you can apply investment tools to case vignettes. It has 22 item sets with 88 questions in 4 hours 24 minutes. You must find data in the vignette, apply the right model, and pick one of three options. There is no penalty for wrong answers.

Level II is an application exam. Every question sits inside an item set: a vignette with exhibits, followed by four three-option questions. You cannot answer from memory alone. You must read the case, pick out the relevant numbers, and apply a model such as a regression output, a valuation method, a bond pricing framework or a Standard from the Code.

The paper covers ten topics: Quantitative Methods, Economics, Financial Statement Analysis, Corporate Finance, Equities, Fixed Income, Derivatives and Risk Management, Alternative Investments, Portfolio Construction, and Ethical and Professional Standards. Financial Statement Analysis, Equities, Fixed Income, Portfolio Construction and Ethics each carry a 10-15% weight range. The other topics carry 5-10%. Topics are placed at random and can appear in either session.

Results are Pass or Did Not Pass, with a scale score. The Minimum Passing Score is 2600 on the scale, and there is no minimum per topic. So a weak area can be offset by strong ones, but ignoring a heavy topic is risky. Candidates usually lose marks not from missing formulas, but from misreading vignettes, mixing up similar models, running short on time, and skipping practice on item sets. Candidates who do well tend to practise many item sets under timed conditions and review every error.

CFA Level II Exam: chapters and topics

Quantitative Methods

Basics of Multiple Regression and Underlying Assumptions

Quantitative Methods

Evaluating Regression Model Fit and Interpreting Model Results

Quantitative Methods

Model Misspecification

Quantitative Methods

Extensions of Multiple Regression

Quantitative Methods

Time-Series Analysis

Quantitative Methods

Machine Learning

Quantitative Methods

Big Data Projects

Economics

Currency Exchange Rates: Understanding Equilibrium Value

Economics

Economic Growth

Financial Statement Analysis

Intercorporate Investments

Financial Statement Analysis

Employee Compensation: Post-Employment and Share-Based

Financial Statement Analysis

Multinational Operations

Financial Statement Analysis

Analysis of Financial Institutions

Financial Statement Analysis

Evaluating Quality of Financial Reports

Financial Statement Analysis

Integration of Financial Statement Analysis Techniques

Corporate Finance

Analysis of Dividends and Share Repurchases

Corporate Finance

Environmental, Social, and Governance (ESG) Considerations in Investment Analysis

Corporate Finance

Cost of Capital: Advanced Topics

Corporate Finance

Corporate Restructuring

Equities

Equity Valuation: Applications and Processes

Equities

Discounted Dividend Valuation

Equities

Free Cash Flow Valuation

Equities

Market-Based Valuation: Price and Enterprise Value Multiples

Equities

Residual Income Valuation

Equities

Private Company Valuation

Fixed Income

The Term Structure and Interest Rate Dynamics

Fixed Income

The Arbitrage-Free Valuation Framework

Fixed Income

Valuation and Analysis of Bonds with Embedded Options

Fixed Income

Credit Analysis Models

Fixed Income

Credit Default Swaps

Derivatives

Pricing and Valuation of Forward Commitments

Derivatives

Valuation of Contingent Claims

Alternative Investments

Introduction to Commodities and Commodity Derivatives

Alternative Investments

Overview of Types of Real Estate Investment

Alternative Investments

Investments in Real Estate through Publicly Traded Securities

Alternative Investments

Hedge Fund Strategies

Portfolio Construction

Economics and Investment Markets

Portfolio Construction

Analysis of Active Portfolio Management

Portfolio Construction

Exchange-Traded Funds: Mechanics and Applications

Portfolio Construction

Using Multifactor Models

Portfolio Construction

Measuring and Managing Market Risk

Portfolio Construction

Backtesting and Simulation

Ethical and Professional Standards

Code of Ethics and Standards of Professional Conduct

Ethical and Professional Standards

Guidance for Standard I: Professionalism

Ethical and Professional Standards

Guidance for Standard II: Integrity of Capital Markets

Ethical and Professional Standards

Guidance for Standard III: Duties to Clients

Ethical and Professional Standards

Guidance for Standard IV: Duties to Employers

Ethical and Professional Standards

Guidance for Standard V: Investment Analysis, Recommendations, and Actions

Ethical and Professional Standards

Guidance for Standard VI: Conflicts of Interest

Ethical and Professional Standards

Guidance for Standard VII: Responsibilities as a CFA Institute Member or CFA Candidate

Ethical and Professional Standards

Application of the Code and Standards: Level II

How to prepare CFA Level II Exam

Plan around application. Learn each model, then practise using it on vignettes until you can find the data and choose the method quickly. Working professionals should plan fixed weekly study blocks and protect them.

  1. Map the syllabus first. List the chapters under each of the ten topics and mark them as strong, medium or weak. Give more time to the 10-15% topics and to your weak areas.
  2. Build a calendar working back from exam day. Set a first pass through all chapters, a second pass for weak areas, and a final period only for mock exams and review. Keep a buffer for missed weeks.
  3. Study each chapter in short sessions. Learn the idea, the formula and the conditions where it applies. Write one page of notes per chapter: the model, when to use it, and the common traps.
  4. Start item-set practice early, not at the end. After each chapter, solve at least one vignette. Practise underlining the data you need and ignoring the rest.
  5. Treat Ethics as a steady weekly habit. Learn each Standard by name, then apply it to cases. Practise saying which Standard is violated and why, and what the member should have done.
  6. Group related topics for linking. Connect regression and time-series to valuation, bond models to derivatives, and financial reporting adjustments to equity valuation. Vignettes often blend them.
  7. Keep an error log. For each wrong answer, note whether the cause was a knowledge gap, a misread, a calculator slip or poor time use. Review it weekly.
  8. Take full timed mocks in the last weeks, as two sessions of 2 hours 12 minutes with 11 item sets each. Review every mock, then revise only the weak chapters and your formula sheet.

Time management in the exam

  • Each session has 11 item sets in 2 hours 12 minutes, which is about 12 minutes per item set. Check your pace against this after every few sets.
  • Read the questions before the vignette. This tells you which data and exhibits to look for, and saves re-reading.
  • Answer easy and short questions first within a set. Mark long calculations and return if time allows. Do not let one question use five minutes.
  • Since there is no penalty for wrong answers, never leave a question blank. Make an informed guess by removing the option you know is wrong.
  • Learn your calculator well before exam day. Slow keystrokes and entry errors cost more time than the maths itself.
  • Use the optional break to reset. Do not carry a bad first session into the second one. Topics can appear in either session, so treat each set on its own.

Mistakes that cost marks in CFA Level II Exam

  • Studying formulas without practising item sets

    Fix: Solve a vignette after every chapter. Practise locating data in exhibits and choosing the right model, not just recalling the formula.

  • Neglecting Ethics until the last weeks

    Fix: Study a little each week. Name the Standard in every practice case and explain the violation in one sentence.

  • Spending too long on one item set

    Fix: Keep to about 12 minutes per set. Flag hard questions, finish the rest, and guess if needed.

  • Ignoring the lighter-weight topics

    Fix: Cover every topic at least to a solid basic level. There is no minimum score per topic, but each topic still contributes to your total.

  • Mixing up similar models and their conditions

    Fix: Write a short note per model: what it is for, its inputs, and the conditions that make it valid. Compare similar models side by side.

  • Not reviewing mock exam errors

    Fix: Log every error by cause and revisit the log weekly. Fix the pattern, not just the single question.

CFA Level II Exam: frequently asked questions

How many questions are in the CFA Level II exam?

There are 22 item sets with 4 questions each, so 88 questions. Twenty item sets are scored and 2 are trial sets that are not scored. You will not know which ones are trial sets.

How long is the CFA Level II exam?

It lasts 4 hours 24 minutes, split into two equal sessions of 2 hours 12 minutes with an optional break. Each session has 11 item sets.

Is there negative marking in CFA Level II?

No. There is no penalty for wrong answers, so you should answer every question. If unsure, eliminate what you can and choose the best option.

What is the passing score for CFA Level II?

The Minimum Passing Score for Level II is 2600 on the scale. Results are reported as Pass or Did Not Pass with a scale score. There is no minimum score for each individual topic.

How many times can I sit the CFA Level II exam in a year?

You may sit a CFA exam at most twice per calendar year. The windows cannot be consecutive or within six months of each other. Also remember that you must complete one Practical Skills Module per level to receive results.