Free CFA Level 2 Practice Exam
CFA Level 2 practice exam with 88 vignette-style questions applying advanced investment analysis, FSA, equity valuation, fixed income, and derivatives. No signup required.
CFA Level 2 Exam
Chartered Financial Analyst -- Level 2. 88 vignette-based MCQs, 4h24m, ~46% pass rate. Tests application and analysis. Note: real exam uses item sets (vignettes); practice questions here are standalone MCQs covering the same concepts.
Ethics & Professional Standards
Applied ethics scenarios, GIPS, and Standards enforcement. 10-15% of exam.
Quantitative Methods
Advanced regression, time series, and machine learning applications. 5-10% of exam.
Economics
Currency exchange rates, international parity conditions, and economic analysis. 5-10% of exam.
Financial Statement Analysis
Intercorporate investments, employee benefits, and advanced FSA. 10-15% of exam.
Equity Investments
DDM, FCFE/FCFF, residual income, relative valuation, and industry analysis. 10-15% of exam.
Fixed Income
Term structure models, credit analysis, MBS, and embedded options valuation. 10-15% of exam.
Derivatives
Pricing and valuation of options, forwards, futures, and swaps. 5-10% of exam.
Portfolio Management
Active management, factor models, risk management, and performance evaluation. 10-15% of exam.
Alternative Investments
Alternative Investments questions covering key CFA Level 2 concepts.
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Full CFA Level 2 Practice Exam
88 questions weighted to mirror the official CFA Level 2 topic weights. Note: real exam uses vignette item sets.
About the CFA Level 2 Exam
The CFA Level 2 exam is the most analytically rigorous level of the CFA Program. Where Level 1 tests knowledge and comprehension across 10 topics, Level 2 tests application and analysis using a vignette (item set) format — each vignette is a mini case study of 1–2 pages followed by 4–6 multiple-choice questions that require you to analyze the scenario rather than recall facts. The pass rate is approximately 46%, lower than Level 1.
The exam contains 88 scored questions across two sessions of 44 questions, with a total time of 4 hours 24 minutes (132 minutes per session). Financial Statement Analysis and Equity Investments receive the highest weights, reflecting the exam's emphasis on securities analysis. Our practice exam covers the same concepts in standalone MCQ format — use it to build topic mastery before tackling full vignette sets.
CFA Level 2 Topic Weights
| Topic | Weight | Key Areas |
|---|---|---|
| Financial Statement Analysis | 10–15% | Intercorporate investments, pension accounting, multinational ops, quality of earnings |
| Equity Investments | 10–15% | DDM, FCFE/FCFF, residual income, EV multiples, industry analysis |
| Fixed Income | 10–15% | Term structure models, credit analysis, MBS/ABS valuation, OAS |
| Derivatives | 5–10% | Pricing forwards/futures/swaps/options, Black-Scholes application, Greeks |
| Alternative Investments | 5–10% | Private equity valuation, real estate, commodity pricing, hedge fund strategies |
| Portfolio Management | 10–15% | Active vs. passive, factor models, alpha/beta separation, attribution |
| Corporate Issuers | 5–10% | M&A valuation, capital structure theory, dividend policy, governance |
| Quantitative Methods | 5–10% | Multiple regression, time-series analysis, machine learning in finance |
| Economics | 5–10% | Currency exchange modeling, economic forecasting, growth accounting |
| Ethical and Professional Standards | 10–15% | Application of standards, GIPS compliance, research objectivity |
Sample CFA Level 2 Questions
1. An analyst calculates the intrinsic value of a stock using the FCFF model. The firm has EBIT of $500M, depreciation of $80M, capital expenditures of $120M, and an increase in net working capital of $30M. The tax rate is 25%. FCFF is closest to:
2. A company's P/E ratio is 18x and its ROE is 15% with a retention ratio of 60%. Using the Gordon Growth Model and assuming the stock is fairly valued, the required return on equity is closest to:
3. An analyst suspects a company is manipulating its earnings by capitalizing operating expenses. Which of the following would most likely be observed if this suspicion is correct?
Study Tips for the CFA Level 2 Exam
The vignette format is the biggest adjustment from Level 1. Practice reading the scenario efficiently — identify what the question is actually asking before re-reading the full vignette. Many candidates waste time reading every number in the exhibit when only 2–3 are relevant to a given question. Build speed by doing timed vignette sets under exam conditions.
Financial Statement Analysis and Equity Valuation together account for 20–30% of the exam. Master pension accounting, intercorporate investment consolidation methods (equity vs. full consolidation), FCFF vs. FCFE models, and EV/EBITDA vs. P/E contexts. Ethics carries 10–15% weight and CFA Institute has confirmed it is used as a tiebreaker for borderline candidates — do not underinvest in it.
Building your foundation? Start with our CFA Level 1 study guide.
The final step in the program is CFA Level 3.
Frequently Asked Questions — CFA Level 2
What is the CFA Level 2 pass rate?
The CFA Level 2 pass rate is approximately 46% — lower than Level 1 (~42% average) in some windows and slightly higher in others. The vignette format and greater analytical depth make it a significant step up from Level 1 for most candidates.
How is CFA Level 2 different from Level 1?
Level 1 uses standalone MCQs testing recall and comprehension across all topics. Level 2 uses item sets (vignettes) requiring analysis of complex scenarios. Topics like FSA and equity go significantly deeper, and the application of valuation models to realistic cases is central. Many candidates describe Level 2 as the hardest of the three levels.
How many hours should I study for CFA Level 2?
CFA Institute's data shows successful Level 2 candidates average approximately 330 hours of study. Candidates upgrading from recent Level 1 preparation may need slightly less; those who took time off between levels should budget 350+ hours and revisit Level 1 quantitative methods and FSA foundations.
What valuation models are tested on CFA Level 2?
Level 2 tests DDM (dividend discount model variants including Gordon Growth, H-model, multi-stage), FCFF and FCFE models, residual income models, EV multiples (EV/EBITDA, EV/EBIT, EV/Sales), and price multiples (P/E, P/B, P/S, P/CF). Know when each model is appropriate, its inputs, and its limitations.
What FSA topics are unique to CFA Level 2?
Level 2 FSA goes beyond Level 1 ratios to include: intercorporate investments (equity method vs. acquisition method consolidation), pension accounting (defined benefit plan assets/liabilities on the balance sheet), lease accounting (IFRS vs. GAAP treatment), currency translation (temporal method vs. current rate method), and quality of earnings analysis.
Is CFA Level 2 harder than the CPA exam?
They test different skills. The CPA (Certified Public Accountant) exam focuses on auditing, tax, and financial accounting for practitioners. CFA Level 2 focuses on investment analysis, valuation, and portfolio management. Most people find CFA Level 2 harder on a quantitative depth basis, but the CPA exam involves four separate sections and broader coverage of accounting regulation. Both are difficult professional certifications.
When is the CFA Level 2 exam offered?
CFA Level 2 is offered in February, May, August, and November — four windows per year, the same as Level 1. You must pass Level 1 before registering for Level 2. Results are typically released 8–10 weeks after the exam.
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