The CFA certification is regarded as one of the most reputed professional degrees. The CFA exam has three levels. In this article, we will explore CFA Level 2 in-depth and understand what to expect of CFA level 2.
CFA Level 2 is a pivotal step in the CFA journey. While Level 1 of the CFA exam tests the candidate’s fundamental knowledge, CFA Level 2 dives deeper into more complex financial topics thus in a way making it difficult to crack even for students with a strong background in finance. CFA level 1 is about understanding the concepts and Level 2 is about applying those concepts.
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There is a 90% more chance of getting best college recommendations by sharing preferences.The CFA program is a professional three-level programme which tests the candidate’s skills and knowledge in the field of finance and investment and the CFA certification is regarded as one of the most reputed professional degrees. In this article, we will explore CFA Level 2 in-depth and understand what to expect of CFA level 2.
Q: How tough is the CFA exam? What are important preparation tips for the CFA exam?
Q: Can I self-study for the CFA exam?
Yes, of course you can self-study for the CFA exam. Many students prefer to choose this option for preparation because of the flexibility it offers. The CFA insitute provides an official curriculum for each level of the exam. It serves as a comprehensive guide and primary source of study material. You can follow the curriculum independently and study at your own pace.
Besides the CFA Institute curriculum, there are number of other resources available for the CFA study material. These may include guides, sample papers, video lectures, tutorials, etc. You can utilize these resources to supplement your self study efforts and reinforce your understanding of the important topics of the CFA syllabus.
Create an effective study plan that outlines your study schedule, goals and progress. This will help you stay organised and improve time management. You can also engage with online forums and communities and various social media groups dedicated to CFA preparation. These platforms provide the opportunity to connect with fellow candidates, seek clarification, share insights and access additional study resources.
While self-studying is a viable option, keep in mind that the CFA exams are rigorous and the material can be complex. Ensure that you allocate sufficient time, maintain discipline and monitor your progress regularly.
Q: What is the mode of CFA exam?
The CFA (Chartered Financial Analyst) exams are conducted in a computer-based testing (CBT) format. The transition from paper-based exams to computer-based exams was implemented by CFA Institute to provide a more efficient and secure testing experience for candidates.
Under the CBT format, candidates take the exams on a computer at designated testing centers. The exams are administered over multiple sessions, with each session focusing on specific topics. The CFA Level I exam consists of multiple-choice questions, while the Level II and Level III exams include item-set questions (also known as vignettes) and constructed response (essay) questions.
The CBT format offers several advantages, such as immediate exam results, standardized navigation tools, the ability to mark and review questions, and an enhanced exam security system. Additionally, candidates have the flexibility to choose their preferred exam date within the available testing window.
It's important to note that while the CFA exams are computer-based, they still maintain the same level of rigor and depth in assessing candidates' knowledge and skills in finance and investment management.
CFA Level 2 Exam Pattern
Refer to the table below to know the detailed CFA Level 2 exam pattern:
| Features |
Details |
|---|---|
| Exam mode |
Computer-based test mode |
| Test duration |
Morning Session: 2 hours 12 minutes Evening Session: 2 hours and 12 minutes |
| Total number of questions |
11 item sets per session with vignettes 44 multiple-choice questions per session |
| Type of questions |
Item Set Questions with Vignettes and Multiple-choice questions (MCQs) |
| Negative Marking |
No |
The CFA Level 2 structure focuses on the broad concepts tested and studied at Level 1. The questions at level 2 are mini case studies that cover real-world financial situations, requiring the aspirants to extract relevant information and apply financial concepts to answer the questions. This format ensures that aspirants not only understand theoretical knowledge but can also demonstrate practical application skills, which are critical in the finance industry.
Also Read:
CFA Level 2 Curriculum: Syllabus Important Topics
The Level 2 CFA syllabus is a continuation of the topics studied at Level 1 but it delves deeper. The CFA syllabus for Level 2 consists of the following topics:
| Topic |
Weightage |
|---|---|
| Ethical and Professional Standards |
15 |
| Quantitative Methods |
15 |
| Economics |
10 |
| Financial Statement Analysis |
15 |
| Corporate Issuers |
5-10 |
| Portfolio Management |
10 |
| Equity Investments |
15 |
| Fixed Income |
15 |
| Derivatives |
5 |
| Alternative Investments |
5 |
Ethical and Professional Standards: This section of the CFA Level 2 exam covers the code of ethics and professional standards. This section is one of the important sections across the three levels of the CFA exam. Students can use the seven Standards of Professional Conduct and the six Components of the Code of Ethics to answer the questions in this section.
Quantitative Methods: There may be one or two item set questions under this section. The candidates will be asked to analyze and interpret data present in case statement presenting data regression. They may require to calculate key metrics based on the available data. The Quantitative Method focuses on data analysis and modeling.
Q: Which level of CFA is the hardest?
The Level 3 CFA Exam is considered by many CFA charterholders as the most challenging due to the amount of time and consideration required to successfully complete the constructed responses. Only about 56% of CFA candidates pass the exam, despite the fact that the Level 3 CFA Exam typically has the highest pass rates of any CFA Exam.
Q: What are the affordable CFA colleges in India?
It is estimated that joining CFA colleges in India can be affordable as most of the colleges have a total tuition fee of less than INR 1 lakh. Listed below are some of the colleges along with their total tuition fees:
| Low-cost Colleges | Total Tuition Fee |
|---|---|
| IMS ProSchool, Pune | INR 20,000 - INR 40,000 |
| IMS Proschool, Chennai | INR 20,000 - INR 40,000 |
| IMS Proschool, Navi Mumbai | INR 20,000 - INR 40,000 |
| IMS Proschool, Andheri West | INR 32,000 - INR 40,000 |
| IIKMFE Financial Education | INR 70,000 |
Q: Is 65 score enough for passing the CFA exam?
Each level of the CFA exam has its own criteria and passing score. CFA institute sets a MPS which changes with each cycle for the newly registered candidates. Some years test takers will receive an overall CFA score of 65% and fail, and in some years they may receieve a score of 62% and pass. The scoring plays a role in deciding the overall pass score in CFA exam. In general, an overall score of 70% and above will help you pass the CFA exam.
Q: What is the weightage of the CFA Level I exam?
The Level I exam covers a broad range of topics, and the weightings can vary slightly from one exam to another. The approximate weightings were as follows:
- Ethics and Professional Standards: 15%
- Quantitative Methods: 10%
- Economics: 10%
- Financial Reporting and Analysis: 15%
- Corporate Finance: 10%
- Equity Investments: 11%
- Fixed Income: 10%
- Derivatives: 6%
- Alternative Investments: 6%
- Portfolio Management and Wealth Planning: 6%
- Quantitative Review: 1%
Q: Which is the easiest pathway in CFA exam Level 3?
No pathway will be easier than the other. Each pathway is designed in a way that they are at par with each other. This does not mean that the CFA pass rate will be also be the same between each as many factors influence pass rate such as quality of the cohort, mix of the cohort, difficulty of the given set of questions in a given window, demographic factors, etc.
Economics: Candidates may expect one item set in this section. Candidates with a good conceptual knowledge of economic concepts can easily score well in this section. Students should have a good hold on the financial market concepts and knowledge about the regulation effects on the markets.
Financial Statement Analysis: This section covers a large part of the Level 2 curriculum. Candidates can expect at least four to five item sets under this section. The important topics under this section are; intercorporate investments, employee compensation, multinational operations, financial institutions, financial report quality evaluation, financial statement modeling, etc.
Corporate Issuers: The Corporate Issuer section focuses on key topics such as capital structure, cost of capital, dividend and repurchase policies, corporate governance, and restructuring challenges. Students are required to understand the impact of different dividend types, explain the theories behind them, and perform calculations involving shares, dividends, buybacks, and tax effects. Additionally, the section emphasizes the importance of ESG (environmental, social, and governance) factors and the associated investment risks, requiring you to understand and explain these issues.
Portfolio Management: There may be one or two item sets under this section as well. This section also has a vast study material. The level of difficulty of this section increases in Level 3 CFA exam. Candidates can focus on gaining a general understanding of the concepts as they will be tested on mechanics of exchange-traded funds, multifactor models and back testing. Students will also be required to compare active and passive portfolio management strategies, explain economics and markets, etc.
Equity Investment: There are about four to five item sets again in this section. Some key topics include, equity valuation methods, terms and definitions, discounted dividend valuation methods, modeling, free cash flow modeling and methods, market-based valuation methods and techniques, residual income calculation, private company valuation models and methods. There will be many formula-based questions in this section.
Fixed Income: Students can expect one or two item sets in this section. This section is also very heavy on formula-based calculations and the concepts are complex. This section has credit analysis, credit default swaps, bonds, arbitrage-free valuation, interest rates, etc. as some of the key topics.
Derivatives: This section can be a challenging one for many. The study material covers futures and forwards, options, swaps, carry arbitrage, currency forwards, and interest rate futures. Students will need to be able to valuate and price forward commitments and contingent claims on both American and European options.
Alternative Investments: This section assesses the student’s ability to analyze investment opportunities in public and private real estate, hedge funds, and commodities. They can expect one or two item sets from this section. Students will need to describe how commodity swaps are utilized, explain roll returns in both contango and backwardation markets, and have a solid understanding of commodity sectors, the role of real estate in a portfolio, and various hedge fund strategies, along with several other related topics.
Also Read: What to expect of CFA Level 1?
CFA Level 2 Exam Tips
Mentioned below are some of the important CFA exam Level 2 tips which will help the students in cracking the exam:
- Financial Statement Analysis questions are based on International Financial Reporting Standards (IFRS) unless noted otherwise. If a question uses US GAAP, it will be clearly mentioned.
- Familiarize yourself with your calculator and its features, as it’s essential for addressing the learning outcome statements (LOS).
- There is no negative marking for wrong answers, but, the students must focus on answering all the questions in the session.
- There is no dress code for the exam day. But, the students must focus on dressing for comfort. Layering is recommended for varying temperatures.
- It is recommended to the CFA mock test for Level 2 to stimulate the actual test day experience.
- Understand how the test center’s hardware/software may affect the student and check the CFA exam calendar for important dates and deadlines.
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Student Forum
Anything you would want to ask experts?Answered 2 months ago
Here are some practical tips to help you perform your best on the CFA exam.
- Financial Statement Analysis: Questions on this topic are based on International Financial Reporting Standards (IFRS) unless otherwise noted. If a question references U.S. GAAP, this will be explicitly stated.
- No penalty for g
A
Contributor-Level 10
Answered 2 months ago
Follow the steps mentioned below to learn how to fill out the CFA application form
- Visit the official website of the CFA institute
- Click on the application link or copy https://login.cfainstitute.org/LoginApplication.
- Create a login account with the candidate’s email ID.
- The candidate will be asked to e
A
Contributor-Level 10
Answered 2 months ago
CFA Charter Holders have the distinct advantage of applying their skills in several professional roles. They can work in areas like wealth management, hedge funds, fixed income, insurance and equity research.
A
Contributor-Level 10
Can you share some tips to prepare for CFA exam?