200+ Free CFA Level II Practice Questions

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Question 1

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Under the CFA Institute Code of Ethics and Standards of Professional Conduct, a member who receives confidential information about a client from a colleague must:

Immediately disclose the information to all team members

Maintain the confidentiality of the information

Share the information only with supervisors

Document the disclosure in writing

to track

2026 Statistics

Key Facts: CFA Level II Exam

44-46%

Historical Pass Rate

CFA Institute

88 Qs

Exam Questions

22 vignettes × 4 questions

300+ hrs

Recommended Study

CFA Institute

200K+

CFA Charterholders

Worldwide

$1,140-1,590

Exam Fee Range

Early/standard registration

3×/year

Exam Windows

May, Aug, Nov

The CFA Level II exam has a 44-46% pass rate, slightly higher than Level I but still very challenging. It features 22 vignettes (item sets) with 88 total questions across two 2-hour 12-minute sessions. Each vignette is followed by 4 multiple-choice questions. The exam is offered three times per year (May, August, November). Level II focuses on asset valuation and application, requiring deeper analytical skills than Level I.

Sample CFA Level II Practice Questions

Try these sample questions to test your CFA Level II exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 200+ question experience with AI tutoring.

1Under the CFA Institute Code of Ethics and Standards of Professional Conduct, a member who receives confidential information about a client from a colleague must:

A.Immediately disclose the information to all team members

B.Maintain the confidentiality of the information

C.Share the information only with supervisors

D.Document the disclosure in writing

Explanation: Standard III(E) Preservation of Confidentiality requires members to maintain the confidentiality of information communicated to them by their clients. This duty of confidentiality continues even after the client relationship ends. The information should not be disclosed to anyone unless legally required to do so or if the information concerns illegal activities.

2A portfolio manager discovers that a colleague has been manipulating performance reports to show better returns. According to Standard I(A) Knowledge of the Law, the manager should:

A.Report the violation to appropriate regulatory authorities

B.Confront the colleague and demand immediate correction

C.Seek legal counsel before taking any action

D.Dissociate from the activity and report to supervisor

Explanation: Standard I(A) Knowledge of the Law requires members to have knowledge of and comply with all applicable laws, rules, and regulations. When members suspect a violation, they should seek legal counsel and may need to dissociate from the activity. In many cases, reporting to a supervisor or compliance department is the first step, but dissociation from the activity is required when the violation is clear.

3An analyst receives a research report from a competitor containing material nonpublic information about an upcoming merger. The analyst should:

A.Use the information to adjust her own forecasts

B.Ignore the information and continue with normal analysis

C.Report the breach to the relevant authorities

D.Contact the company to verify the information

Explanation: Standard II(A) Material Nonpublic Information prohibits members from acting or causing others to act on material nonpublic information. If an analyst inadvertently receives such information, the appropriate action is to not use it and continue with normal analysis procedures. Trading on or disseminating the information would violate the standard.

4A research analyst is preparing a report on a company where his spouse owns a significant number of shares. Under Standard VI(A) Disclosure of Conflicts, he must:

A.Only disclose if the report is a sell recommendation

B.Disclose the conflict in the research report

C.Obtain written permission from his employer

D.Recuse himself from covering the company

Explanation: Standard VI(A) Disclosure of Conflicts requires members to disclose all matters that reasonably could be expected to impair their objectivity or interfere with their duties to clients. Ownership of securities by immediate family members constitutes a conflict of interest that must be disclosed in research reports.

5Under Standard V(A) Diligence and Reasonable Basis, which of the following actions is most appropriate when an analyst uses a third-party research provider?

A.Rely on the provider's reputation alone

B.Verify the provider's independence and objectivity

C.Use the research without attribution

D.Confirm only the mathematical calculations

Explanation: Standard V(A) requires members to exercise diligence, independence, and thoroughness in analyzing investments and making investment recommendations. When using third-party research, members should verify the provider's independence and objectivity, and have a reasonable basis for the conclusions they draw from that research.

6A portfolio manager accepts a lavish vacation package from a broker in exchange for directing client trades to that broker. This arrangement most likely violates:

A.Standard III(A) Loyalty, Prudence, and Care only

B.Standard I(B) Independence and Objectivity only

C.Both Standard I(B) and Standard III(A)

D.Neither standard if disclosed to clients

Explanation: Accepting lavish gifts from brokers violates Standard I(B) Independence and Objectivity because it creates a conflict of interest that could compromise the manager's judgment. It also violates Standard III(A) Loyalty, Prudence, and Care because the manager must act for the benefit of clients and place their interests first. Best execution requires selecting brokers based on client benefit, not personal gain.

7According to the CFA Institute Code of Ethics, members and candidates must place the integrity of the investment profession and the interests of clients above their own personal interests. This requirement is most closely associated with which principle?

A.Act with integrity, competence, diligence, respect, and in an ethical manner

B.Place the integrity of the investment profession and interests of clients above personal interests

C.Practice and encourage others to practice in a professional and ethical manner

D.Strive to maintain and improve their competence

Explanation: The CFA Institute Code of Ethics consists of six principles. The second principle specifically states that members and candidates must place the integrity of the investment profession and the interests of clients above their own personal interests. This principle aligns with the fiduciary duty that investment professionals owe to their clients.

8In a multiple regression model, if the variance inflation factor (VIF) for an independent variable is 8.5, this indicates:

A.No multicollinearity concerns exist

B.Mild multicollinearity that can be ignored

C.Serious multicollinearity requiring attention

D.The model is misspecified

Explanation: A VIF greater than 5 typically indicates serious multicollinearity that requires attention. Some practitioners use a threshold of 10. A VIF of 8.5 suggests that the variance of the coefficient estimate is 8.5 times larger than it would be if the variable were uncorrelated with other independent variables. This high level of multicollinearity can make coefficient estimates unstable and standard errors inflated.

9Which of the following is most likely a characteristic of a stationary time series?

A.The mean changes over time

B.The variance is constant over time

C.There is a deterministic trend

D.The autocorrelations depend on time

Explanation: A stationary time series has constant statistical properties over time, including a constant mean, constant variance, and constant autocorrelations that do not depend on time. If a series has a trend, changing variance, or time-dependent autocorrelations, it is non-stationary. Non-stationary series often require transformation (such as differencing) before they can be used in regression analysis.

10In supervised machine learning, the primary distinction from unsupervised learning is that:

A.Supervised learning requires more data

B.Supervised learning uses labeled training data

C.Supervised learning cannot handle categorical variables

D.Supervised learning always produces better predictions

Explanation: Supervised machine learning uses labeled training data, meaning the target variable (outcome) is known for the training dataset. The algorithm learns the relationship between input features and the target variable. In contrast, unsupervised learning works with unlabeled data to discover patterns or groupings. Common supervised learning algorithms include regression and classification trees, while clustering is an example of unsupervised learning.

About the CFA Level II Exam

The CFA Level II exam is the second of three levels required to earn the Chartered Financial Analyst designation. It focuses on asset valuation and application, testing your ability to analyze complex financial scenarios through vignette-based item sets. The exam covers all 10 topic areas with emphasis on applying concepts learned in Level I. The vignette format presents real-world scenarios followed by 4-6 related questions.

Questions

88 scored questions

Time Limit

4h 24m (2 sessions × 2h 12m)

Passing Score

~70% (scaled)

Exam Fee

$1,140-$1,590 (CFA Institute)

CFA Level II Exam Content Outline

10-15%

Ethical and Professional Standards

Application of Code and Standards, GIPS, research objectivity, soft dollar arrangements

5-10%

Quantitative Methods

Multiple regression, time series analysis, machine learning, big data

5-10%

Economics

Currency exchange rates, economic growth, international trade, emerging markets

10-15%

Financial Statement Analysis

Intercorporate investments, pension accounting, multinational operations, quality of earnings

5-10%

Corporate Issuers

Capital budgeting, capital structure, dividend policy, corporate governance, M&A

10-15%

Equity Valuation

DCF models, multiples, residual income, private company valuation, H-model

10-15%

Fixed Income

Term structure, credit analysis, interest rate risk, MBS, ABS, credit derivatives

5-10%

Derivatives

Forward/futures, options, swaps, derivatives valuation models

5-10%

Alternative Investments

Private equity, real estate, hedge funds, commodities, infrastructure

10-15%

Portfolio Management

Asset allocation, risk models, behavioral finance, wealth management

How to Pass the CFA Level II Exam

What You Need to Know

Passing score: ~70% (scaled)
Exam length: 88 questions
Time limit: 4h 24m (2 sessions × 2h 12m)
Exam fee: $1,140-$1,590

Keys to Passing

Complete 500+ practice questions
Score 80%+ consistently before scheduling
Focus on highest-weighted sections
Use our AI tutor for tough concepts

CFA Level II Study Tips from Top Performers

1Practice with vignettes daily — reading comprehension and data extraction are key skills

2Master Financial Statement Analysis — intercorporate investments and pension accounting are heavily tested

3Focus on equity valuation models — DCF, multiples, and residual income methods

4Understand fixed income valuation — including MBS prepayment risks and credit analysis

5Know the Code and Standards cold — ethics is heavily weighted and applies to all scenarios

6Take at least 6-8 full-length mock exams to build stamina for the vignette format

7Practice with a calculator until all TVM and statistical functions are second nature

Frequently Asked Questions

What is the CFA Level II pass rate?

The CFA Level II pass rate historically averages 44-46%, slightly higher than Level I but still very challenging. The vignette format requires deeper analytical skills and the ability to extract relevant information from complex scenarios. Pass rates can fluctuate based on exam difficulty and candidate preparation.

How many questions are on the CFA Level II exam?

The CFA Level II exam has 88 multiple-choice questions organized into 22 vignettes (item sets). Each vignette presents a scenario followed by 4 questions. The exam is split into two sessions of 11 vignettes each (44 questions per session). Each session is 2 hours and 12 minutes.

How hard is the CFA Level II exam?

CFA Level II is considered very challenging with its 44-46% pass rate. The vignette format is different from Level I and requires strong reading comprehension and analytical skills. Many candidates find Level II more difficult than Level I due to the depth of analysis required. Time management is critical — you have 3 minutes per question.

What are the CFA Level II requirements?

To register for CFA Level II, you must have passed Level I. The same education/work experience requirements apply as Level I: (1) a bachelor's degree, or (2) 4,000 hours of professional work experience, or (3) a combination totaling 4,000 hours. You can register for Level II while awaiting Level I results.

How long should I study for CFA Level II?

CFA Institute recommends 300+ hours of study for Level II. Most successful candidates study 4-6 months, completing the curriculum and 1,500+ practice questions. Focus heavily on Equity Valuation (10-15%), Fixed Income (10-15%), Financial Statement Analysis (10-15%), and Ethics (10-15%). Practice extensively with vignette-style questions.

What topics are most heavily tested on CFA Level II?

The five largest sections are: Ethical and Professional Standards (10-15%), Financial Statement Analysis (10-15%), Equity Valuation (10-15%), Fixed Income (10-15%), and Portfolio Management (10-15%). These five topics comprise over 60% of the exam. Corporate Issuers, Derivatives, and Alternatives are typically smaller (5-10% each).