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Comparing All Three Levels of the CFA® Exam

By: Kaplan Schweser
January 11, 2021
Comparing the 3 levels of the CFA exam

The three levels of the CFA® exam reflect the natural progression from demonstrating knowledge of concepts, to applying them, to solving real-world portfolio management and compliance scenarios. As a result, each exam level is unique in its own way. This article breaks down the differences between the three levels, so you can understand what you’ll face as you sit for each one.

CFA® Exam Level I

  • Level I of the CFA exam tests knowledge and comprehension). The focus is on investment tools and ethical and professional standards. Beginning in 2022, it will be offered four times a year; in 2021, due to the coronavirus, additional seatings were added to accommodate postponed exams and full testing centers.
  • The Level I curriculum mainly focuses on recalling formulas and definitions from memory, and most of the material is a straightforward introduction to the concepts covered. For Level II and Level III, you cannot rely on memorization or recall.
  • The Level I exam currently is computer-based and consists of 180 multiple-choice questions.
  • Each of the questions is unrelated to the others and is usually a prompt, such as, “The period of time within which a hedge fund must fulfill a redemption request is called…” This is not the case for Level II and Level III.
  • The Level I exam covers 19 study sessions, 57 readings, and 10 topics.
  • The weights for the 2022 Level I exam topics are: Ethics—15–20%; Quantitative Methods—8–12%; Economics—8–12%; Financial Reporting and Analysis—13–17%; Corporate Finance—8–12%; Portfolio Management—5–8%; Equity Investments—10–12%; Fixed Income—10–12%; Derivative Investments—5–8%; and Alternative Investments—5–8%.
  • The pass rates for the Level I exam are the lowest of the three levels. You can find the most recent pass rates here.

If you’re thinking of becoming a CFA charterholder, download our free eBook, Before You Decide to Sit for the CFA® Exam, to get advice and tips from past exam-takers.

CFA Exam Level II

  • Level II of the CFA exam tests application and analysis with a focus on asset valuation. Unlike Level I, Level II focuses on how you apply standards to situations that analysts face. Beginning in 2022, it will be offered twice a year; in 2021, due to the coronavirus, additional seatings were added to accommodate postponed exams and full testing centers. 
  • The Level II exam has questions organized as “item sets,” each based on a shared situation, called a vignette, with four to six sub-questions that go deep into a single topic.
  • Be prepared to demonstrate that you can apply tools and relationships to the analysis of financial data and the valuation of assets. Memorizing concepts should not be your focus; instead, you need to show you understand how to use them.
  • Each vignette uses a combination of text, tables, financial statements, and more to describe a business scenario. Learn how to scan through a vignette quickly and pick out the pieces of data needed to answer a particular question.
  • The Level II exam covers 48 readings and has 14 study sessions.
  • The 10 topics are the same as Level I, but at Level II, CFA Institute provides a different range of topic weights. For example, Portfolio Management in Level II can have a weight anywhere from 10–15% (each 5% weighting represents one item set on the exam).
  • Financial Reporting and Analysis, Equity Valuation, and Fixed Income are the key topics for passing the June 2022 Level II with topic weights of 10–15%.
  • The pass rate for the Level II exam hovers between 42% and 45%. That means that even though fewer candidates sat for the Level II exam than Level I, less than half of them passed. It is generally believed by CFA charterholders that Level II is the hardest level. You can find the most recent pass rates here.

CFA Exam Level III

  • Level III requires you to demonstrate the same skills as Level II, but you also have to show that you can make judgment calls and that you can write about them. The exam is also more subjective than Level II.
  • The Level III CFA exam is composed of 8–12 constructed response questions (or 50% of the exam), and the second half consists of vignettes, each of which has multiple-choice questions.
  • The constructed response section of the Level III CFA exam is the biggest difference between Level II and Level I. You must answer open-ended questions on a blank piece of paper without any answers to choose from. You can learn this skill with practice.
  • Level III has 16 study sessions and 38 readings, and the exam only covers seven topics. It excludes Financial Reporting and Analysis, Quantitative Methods, and Corporate Finance.
  • The weightings of the topics are also in ranges, with Portfolio Management weighted the heaviest at 35–40%, followed by Fixed Income at 15–20%, and Equity and Ethics, both at 10–15%.
  • The exam integrates more topics in a question than Level II. For example, a question may combine the concepts from Study Session 3, Behavioral Finance, and Study Sessions 12 and 13, both on Private Wealth Management.
  • The pass rate for Level III is the highest of the three levels. It is usually over 50%. Although this is more than half of all CFA Level III candidates, many wonder why the number isn’t higher. The reason is the constructed response section. You can find the most recent pass rates here.

Ready to Learn More?

There are some similarities between the three levels of the CFA exam. As you’ve seen already, the exams share some of the same topics. In addition, each requires you to spend, at minimum, 300 hours preparing for the exam. And, finally, you can use the same CFA Institute-approved calculator for each exam.

If you want more details on the exams, check out these FAQs for Level ILevel II, and Level III. If you’ve decided to get started by sitting for Level I of the exam, exam preparation packages can help.

Free eBook: Before You Decide to Sit for the CFA® Program Exam

Free eBook: CFA® Program Fundamentals, 2nd Edition

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