What are the Differences between CFA® Level I and Level II Exam?

One of the most common questions that CFA candidates have is the differences between the three levels of the course. If you have completed CFA level I and preparing for the next level, this article highlights the differences between the two.

1. CFA level II exam has vignettes

The level I exam consists of individual questions, while level II includes vignettes. Vignettes are brief descriptions of business scenarios containing tables, texts and sometimes financial statements. Vignettes have several questions that require the candidate to answer using information from the case study. As a CFA level II candidate, you should develop the skill to identify which information is relevant for each question.

2. Exam format

CFA level I exam has 80 individual multiple choice questions which are not related to each other. On the other hand, level II exams consist of four to six questions set up in sets based on a vignette. Each set of questions is based on a common topic making it essential to have in-depth knowledge of key concepts. As a result, you should be more thorough when studying for CFA level II exams.

3. Exam windows

The CFA Level I exams are offered more times a year than level II exams. Consequently, candidates who fail an exam cannot retake it in the following exam window but have to wait. Therefore, level I candidates wait for at least six months while level II candidates wait even longer.

4. Ability to rely on past knowledge

The minimum entry requirement for CFA level I exams is an undergraduate degree or similar qualification in a business-related field. Therefore, level I candidates have an advantage since this knowledge provides a basis for understanding level I curriculum concepts. In contrast, level II candidates do not have this advantage because previous knowledge does not give an edge in their curriculum.

5. Topics and their exam weights

Although CFA level I and II have the same ten topics of focus, their weights in exams are different. The CFA Institute indicates specific topic weights for level I but gives ranges in level II. For instance, portfolio management weights 6% in level I, while in level II, portfolio management has 5- 15% weight, where each 5% weight is for one item set.

The CFA Level I curriculum covers ten topics, each with a different weight in the exam, which change regularly, 19 study sessions, and 57 readings. The test will focus on your knowledge and comprehension of these ten topics.

The topics in CFA level II are the same as those in level I but with a different range of topic weights. The key subjects include fixed income, equity valuation, and financial reporting. In addition, there are only 48 readings and 14 study sessions.

6. Memorization versus analysis

The CFA level I curriculum places focus on recalling definitions of concepts and memorization of formulas. In comparison, the level II curriculum requires the candidates to demonstrate an in-depth understanding of concepts. As a level II candidate, the exam will test your ability to apply skills learnt to analyze financial data, value assets and establish relations between variables. Additionally, you should be able to link one concept to another.

7. Complex concepts and question difficulty

CFA level I exam covers a broader part of the curriculum, and the questions are simpler than level II. Secondly, the material covered in level I is more straightforward compared to more comprehensive complex concepts covered in level II. As a result, level II exam questions are more challenging for candidates.

You should keep in mind that although the topics are the same, level II exam questions test at a higher level than level I. Therefore, you need more preparation and skill to pass level II exams.

7. Pass rates

The most significant difference between CFA level I and level II candidates is the entry requirements. While level I is open for anyone with a business-related undergraduate degree, you need to pass level I before enrolling for Level II. As a result, level II is more competitive than level I.

Additionally, level I has a lower pass rate than level II. According to the CFA Institute, the Level II pass rate was 44% in 2019, while the pass rates for level I were 41% for the June exam window and 42% for the December exam window.

In conclusion, both CFA levels curricula share similar topics. The significant differences are the exam formats and question structure. Level I exam is computer-based with individual multiple-choice questions, while level II includes vignettes with multiple-choice questions. Level I curriculum emphasizes memorization, while level I exam requires candidates to demonstrate in-depth knowledge of the material. Additionally, Level I has a lower pass rate compared to level II.

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