CFA Level II

The Level II syllabus focuses on asset valuation, where candidates must employ concepts of quantitative techniques, economic analysis, accounting-in analysing and valuing investments. It is composed of item set questions and is offered in June only. Students should have a thorough understanding of the capital market theory and industry and company analysis, and of:

  1. Analysing equity and fixed-income securities and other financial investments
  2. Evaluating alternative investment choices
  3. Making investment proposals
  4. Estimating expected investment return on investment and risks

Exam Question Format:

The examination consists of 20 item sets – 10 for each of the sessions i.e. for morning and afternoon sessions. Item sets are sometimes called “mini-cases”. Each item set on the CFA examination consists of a vignette (or case statement) and 6 multiple choice questions.

The length of a vignette ranges from about 1 page to 2.5 pages. The longer vignettes are those that include several tables of information, such as for a financial statement analysis, statistics, or fixed-income item set. The average length of the vignettes on the examination is 1.5 pages.

The 6 items in each item set can only be answered based on the information in the vignette. Hence, the items are not free standing (as in Level I), but are drawn from the vignette. You will need to read the vignette before answering the items, and you will need to refer back to the vignette for information. The 6 items can be answered independently of each other, but they do require the information given in the vignette.

On the Level II examination, you will have a total of 120 items (20 vignettes with 6 items each). The examination formats (including the essays at Level III) adapt to the changing topic focus and learning focus at each level. The topic focus on Level II is on asset valuation. The learning focus also changes, from knowledge and comprehension (Level I), to application and analysis (Level II), to synthesis and evaluation (Level III).

The Level II and III examinations are graded for 360 points, corresponding to the number of minutes on the examination. The 120 Level II items are equally weighted, 3 points each, with no penalty for guessing.

While you are taking the Level I multiple choice exam, remember:

  • Read the formatting conventions for writing multiple choice questions at Level I. These same “best practices” are followed for item sets questions at Levels II and III.
  • Expect to go slower on the Level II examination than on Level I. You are answering 50 percent fewer questions, but spending twice as much time thinking about each one (including time for reading and analyzing the vignettes).
  • You may mark up your examination book. Circle or underline important information in the vignette and write down your equations or logic. However, only your final answers recorded on the answer sheets are graded.
  • Mark your answers on the answer sheet as you complete each question. Some candidates mark their answers in the examination book and wait until the end of the examination to complete the answer sheet. This is not at all advisable.

If you do not know the answer to a question:

  • You might be able to eliminate one or more choices based on what you know about the topic. There is no penalty for guessing.
  • Use reasoning and logic. The concepts that you know on one topic often apply to another topic.
  • Expect to encounter questions that you will not be able to answer correctly. There is a great deal of material to master and examination questions are challenging. Standard setters and the Board of Governors (at all three levels) take account of examination difficulty in setting Minimum Passing Scores. For a full description of how the MPS is established, visit www.cfainstitute.org.