CFA® Level 2 Exam: What You Need to Know

Passing the CFA® Level 1 exam is a significant milestone—you’re one-third of the way to earning the charter. But don’t get too comfortable. The CFA® Level 2 exam is a whole new challenge, focusing less on memorization and more on applying your knowledge as an analyst.

With a 46% historical pass rate, this exam won’t ask for formulas but will require you to choose the best methodology or spot trends in complex case studies.

The hardest part?

Navigating tricky wording and exotic terminology that can easily trip you up. Most mistakes in mock exams come from misinterpreting questions or overlooking small details. Rather than trying to memorize everything, focus on understanding CFA® II concepts and applying them to real-world scenarios.

With that in mind, let’s dive into strategies and key topics that will help you succeed in the CFA® Level 2 exam.

Key Takeaways

• Practical Application Over Memorization: The CFA® Level 2 exam focuses on applying complex financial concepts like equity investments, fixed income, corporate finance, and portfolio management to real-world scenarios.
• Weighted Topic Importance: Prioritize heavily weighted sections like FRA and Equity Investments while ensuring a basic understanding of all topics.
• Exam Format: The Level II exam consists of 88 multiple-choice questions based on case studies, testing your ability to integrate and apply CFA® knowledge across various financial concepts.
• Candidate Tips for Success: Use practice questions, mock exams, and focus on formulas and ethics for comprehensive exam prep.
• 2025 Curriculum Changes: Minor updates focus on Alternative Investments and Ethics, with two learning modules removed.

Understanding the CFA® Program and Level 2 Exam

The CFA® Institute administers the CFA® program, which is globally recognized for its rigorous curriculum and high standards. The Level II CFA® Exam builds on the foundational knowledge tested in Level I, focusing on asset valuation, investment analysis, and portfolio management. Achieving success at this level demands a thorough understanding of financial concepts and the skill to apply them in intricate, real-world contexts.

Before you can register for the CFA® Level 2 Exam, you must pass the Level I exam. Additionally, candidates need to have a bachelor’s degree or equivalent professional experience. Meeting these prerequisites ensures that you’re well-prepared for the challenges of the Level II exam.

What Will Be Tested on the CFA® Level 2 Exam

The CFA® Level 2 exam builds upon the foundation laid in Level I, focusing on the application of complex financial concepts. You’ll be tested on key areas like equity investments, fixed income, corporate finance, and portfolio management, with an emphasis on applying these concepts in real-world scenarios. Each section is structured around Learning Outcome Statements (LOS), which outline what you’re expected to master.

Key topics include:

• Equity Investments: Deep dive into valuation methods, investment strategies, and market efficiency.
• Fixed Income: Detailed analysis of bond valuation, interest rate risk, and fixed income portfolio management.
• Portfolio Management: Application of portfolio strategies considering client objectives, risk tolerance, and constraints.
• Corporate Finance: Concepts such as capital budgeting, capital structure, and dividend policies.
• Ethics: Reinforced through updated standards in the curriculum, requiring candidates to apply the Code of Ethics and Standards of Professional Conduct.

The exam’s format requires more than just memorization; it tests your ability to apply critical knowledge in CFA® related practical situations. Practice questions from the best CFA® prep and mock exams are key tools to help candidates sharpen application skills and improve exam readiness, but I’ll talk to you more about this later.

CFA® Level 2 Exam Format and Structure

The CFA® Level 2 Exam is split into two sessions, with each session lasting 2 hours and 12 minutes. The exam consists of 88 multiple-choice questions grouped into 44 item sets, each based on a case study. These item sets test your ability to apply knowledge across a range of financial topics, such as corporate finance, portfolio management, fixed income, and wealth planning.

Understanding the format is crucial, as the Level II exam is designed to assess how well you can integrate the tools and concepts learned in Level I. This exam requires significant study hours dedicated to mastering these topics. Many successful candidates report using mock exams and practice questions extensively to develop the skills necessary for tackling the complex item sets presented during the exam.

CFA® Exam Changes for 2025

The 2025 CFA® Level 2 curriculum introduces minor updates, especially in Alternative Investments and Ethics. The “Overview of Types of Real Estate Investment” module has been thoroughly updated, and Ethics has seen revisions to three learning modules.

Additionally, two Learning Modules—Economics of Regulations and Financial Statement Modeling—have been removed, decreasing the total number of modules from 47 to 45. These updates help keep the curriculum relevant and aligned with current industry practices.

CFA® Exam Dates and Exam Window

The CFA® Institute offers the Level II CFA® Exam during three exam windows: May, August, and November. This flexibility allows candidates to choose a CFA® exam date that fits their schedule. However, it’s essential to plan your study timeline carefully, considering your work commitments and personal obligations.

Early registration for the CFA® exam is advisable to secure your preferred exam date and save on registration fees. The early registration fee is more affordable than the standard registration fee, so it’s a good idea to register as soon as possible. Keep in mind that popular exam centers fill up quickly, so early action is key.

Tips from CFA® Level II Candidates

As you prepare for the CFA® Level II exam, the experiences and strategies shared by past candidates can offer invaluable advice. Here’s a compilation of tips to help you succeed:

• Focus on Practice Questions: Many candidates stress the importance of practice questions. One suggested, “Re-do the QBank… don’t worry if you get the ‘expert’ questions wrong; the exam is much more straightforward.” Doing practice questions regularly can reinforce key concepts and expose weak areas.
• Mock Exams as a Learning Tool: Don’t just take mock exams for the sake of it—use them as a learning experience. One candidate advised, “Space your mocks out… Use them as learning tools rather than just taking them all in the final week.” This approach helps you identify weak areas and build confidence for the real exam.
• Prioritize High-Weight Topics: With limited time, focusing on heavily weighted topics is crucial. One candidate shared, “Make sure to cover the modules with the highest weightage… topics like FRA and Equity Investments are essential.” While you shouldn’t skip other topics, it’s important to spend extra time on the sections that will carry the most weight on the exam.
• Keep Revising and Don’t Panic: Some candidates reported feeling like they were forgetting topics as the exam approached. “It happens to the best of us—just keep revising and practicing your weak areas,” one said. A steady review of all sections can help alleviate the feeling of information slipping away.
• Ethics and Small Details Matter: Ethics is often a tricky section. “Think like a computer when answering Ethics questions—don’t rely on your own moral judgment, but follow the standards,” advised a candidate. It’s also important to pay attention to the fine details in questions, as they can often trip you up.

Final Month Strategy

As the exam approaches, the focus shifts to making the most of your remaining time. Candidates suggest:

• Don’t Overload with Mocks: If you’re short on time, prioritize revision and targeted practice over endless mocks. One candidate said, “It’s all about using every hour wisely—if you’re pressed for time, focus on solidifying weak areas rather than taking too many mocks.”
• Target Weak Areas: If you’re struggling with specific sections, like Derivatives or Fixed Income, allocate time each day to revisit those concepts. “You don’t need to master everything, but understanding your weak spots and working on them can boost your overall score,” a candidate shared.
• Use Formulas: A popular strategy is creating and reviewing formula sheets daily. “Write out formulas and go over them each day—this helped lock in the knowledge when I needed it most,” said one candidate.

These tried-and-true strategies can help you optimize your study plan and approach the CFA® Level II exam with confidence. While the road to success can be daunting, consistent practice, a smart revision plan, and learning from others’ experiences will give you the best chance of passing.

Moving Forward: Preparing for the Next Levels

After passing the CFA® Level 2 Exam, you can register for the Level III exam. The Level III exam focuses more on portfolio management and wealth planning, requiring a deep understanding of the material. As you advance through the levels, your knowledge and expertise will expand, positioning you to become a CFA® charterholder and excel in the finance industry.

Conclusion

The CFA® Level 2 exam demands the application of financial concepts in real-world scenarios. Success requires thorough preparation across all topics, with a focus on portfolio management, ethics, and the ability to handle essay questions effectively. Upcoming changes in 2025 will provide more specialization, making the exam even more tailored to candidates’ professional goals.

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