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CFA Institute CFA-Level-II Exam Questions

Exam Name: CFA Level II Chartered Financial Analyst
Exam Code: CFA-Level-II
Related Certification(s): CFA Institute CFA Level II Certification
Certification Provider: CFA Institute
Actual Exam Duration: 180 Minutes
Number of CFA-Level-II practice questions in our database: 715 (updated: Apr. 11, 2025)
Expected CFA-Level-II Exam Topics, as suggested by CFA Institute :
  • Topic 1: Equity Valuation
  • Topic 2: Financial Reporting and Analysis
  • Topic 3: Ethical and Professional Standards .
Disscuss CFA Institute CFA-Level-II Topics, Questions or Ask Anything Related

Felice

12 days ago
CFA Level II conquered! Pass4Success's materials made all the difference in my limited study time.
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Nickolas

1 months ago
Pass4Success's CFA Level II questions were spot on. Passed the exam with confidence!
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Cyndy

2 months ago
Aced CFA Level II! Pass4Success's exam-like questions were crucial for my quick preparation.
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Josphine

3 months ago
I passed the CFA Level II exam! One question in the Ethical and Professional Standards section asked about the appropriate action to take when encountering a conflict of interest. I was a bit unsure, but the practice questions from Pass4Success were a great help.
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Bong

3 months ago
CFA Level II success! Pass4Success's relevant questions were a game-changer in my short prep time.
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Mabel

4 months ago
I did it! I passed the CFA Level II exam. There was a difficult question on Economics that asked about the effects of an expansionary fiscal policy on interest rates and inflation. I wasn't certain of my answer, but Pass4Success practice questions made a big difference.
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Sanda

4 months ago
Pass4Success nailed it with their CFA Level II materials. Exam felt familiar thanks to their questions.
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Dyan

5 months ago
I can't believe I passed the CFA Level II exam! One question in the Derivatives section asked about the pricing of a European call option using the Black-Scholes model. I was unsure, but the practice questions from Pass4Success were incredibly helpful.
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Omega

5 months ago
I passed! The CFA Level II exam had a tough question on Equity Investments. It asked about the impact of a stock split on the price-to-earnings ratio. I wasn't confident in my answer, but Pass4Success practice questions were a great help.
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Roy

5 months ago
Couldn't believe how well Pass4Success prepared me for CFA Level II. Passed with flying colors!
upvoted 0 times
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Billye

6 months ago
I made it through the CFA Level II exam! There was a challenging question in Quantitative Methods about the application of the Monte Carlo simulation in portfolio risk assessment. I was a bit unsure, but the practice questions from Pass4Success were invaluable.
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Sherell

6 months ago
I passed the CFA Level II exam! One question that caught me off guard was about Corporate Issuers. It asked how changes in capital structure could affect the weighted average cost of capital (WACC). I wasn't sure, but Pass4Success practice questions helped me prepare well.
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Michel

6 months ago
Overall, the CFA Level II exam was challenging but rewarding. The key is to practice applying concepts to real-world scenarios. Stay focused, manage your time well, and you can succeed. Best of luck to future candidates!
upvoted 0 times
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Leslie

6 months ago
CFA Level II was tough, but Pass4Success made prep a breeze. Passed on my first try!
upvoted 0 times
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Linette

7 months ago
Wow, I did it! The CFA Level II exam is behind me. There was a tricky question on Alternative Investments that asked about the valuation of a private equity investment using the discounted cash flow method. I was uncertain, but the practice questions from Pass4Success really made a difference.
upvoted 0 times
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Wade

7 months ago
The exam was challenging, but I'm thrilled to have passed! Thanks again to Pass4Success for the excellent preparation materials. They really made a difference!
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Cletus

7 months ago
I can't believe I passed the CFA Level II exam! One question that really stumped me was about the yield curve in the Fixed Income section. It asked how a flattening yield curve would impact bond prices, and I wasn't entirely sure of my answer. Thankfully, the Pass4Success practice questions were a huge help.
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Floyd

7 months ago
Just passed CFA Level II! Thanks Pass4Success for the spot-on practice questions. Saved me so much time.
upvoted 0 times
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Graciela

9 months ago
The Financial Reporting and Analysis section of the CFA Level II exam was tough, but with the help of Pass4Success practice questions, I was able to navigate through it successfully. I had to analyze financial statements and make adjustments for different accounting principles. One question that I remember was about how to calculate the return on assets ratio and interpret its implications for a company's performance. It was a tricky question, but I managed to answer it correctly and pass the exam.
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Georgene

10 months ago
Just passed CFA Level II! Watch out for complex questions on duration and convexity in fixed income. Understand how changes in interest rates affect bond prices and portfolio risk. Pass4Success's practice questions were spot-on and really helped me prepare efficiently. Thanks!
upvoted 0 times
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Isreal

10 months ago
I passed the CFA Level II exam with the help of Pass4Success practice questions. The exam was challenging, especially the Equity Valuation section. I had to really focus on understanding different valuation methods and applying them to various scenarios. One question that stood out to me was about calculating the intrinsic value of a company using the dividend discount model. I wasn't completely sure of my answer, but I trusted my knowledge and ended up passing the exam.
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Free CFA Institute CFA-Level-II Exam Actual Questions

Note: Premium Questions for CFA-Level-II were last updated On Apr. 11, 2025 (see below)

Question #1

Glenda Garvey is interning at Samson Securities in the summer to earn money for her last semester of studies for her MBA, She took the Level 3 CFA exam in June but has not yet received her score. Garvey's work involves preparing research reports on small companies.

Garvey is at lunch with a group of co-workers. She listens to their conversation about various stocks and takes note of a comment from Tony Topel, a veteran analyst. Topel is talking about Vallo Engineering, a small stock he has tried repeatedly to convince the investment director to add to the monitored list. While the investment director does not like Vallo, Topel has faith in the company and has gradually accumulated 5,000 shares for his own account. Another analyst, Mary Kennedy, tells the group about Koral Koatings, a paint and sealant manufacturer. Kennedy has spent most of the last week at the office doing research on Koral. She has concluded that the stock is undervalued and consensus earnings estimates are conservative. However, she has not filed a report for Samson, nor does she intend to. She said she has purchased the stock for herself and advises her colleagues to do the same. After she gets back to the office, Garvey purchases 25 shares of Vallo and 50 shares of Koral for herself.

Samson pays its interns very little, and Garvey works as a waitress at a diner in the financial district to supplement her income. The dinner crowd includes many analysts and brokers who work at nearby businesses. While waiting tables that night, Garvey hears two employees of a major brokerage house discussing Metrona, a nanotechnology company. The restaurant patrons say that the broker's star analyst has issued a report with a buy rating on Metrona that morning. The diners plans to buy the stock the next morning. After Garvey finishes her shift, restaurant manager Mandy Jones, a longtime Samson client, asks to speak with her. Jones commends Garvey for her hard work at the restaurant, praising her punctuality and positive attitude, and offers her two tickets to a Yankees game as a bonus.

The next morning, Garvey buys 40 shares of Metrona for her own account at the market open. Soon afterward, she receives a call from Harold Koons, one of Samson's largest money-management clients. Koons says he got Garvey's name from Bertha Witt, who manages the Koons' account. Koons wanted to reward the analyst who discovered Anvil Hammers, a machine-tool company whose stock soared soon after it was added to his portfolio. Garvey prepared the original report on Anvil Hammers. Koons offers Garvey two free round-trip tickets to the city of her choice. Garvey thanks Koons, then asks her immediate supervisor, Karl May, about the gift from Koons but does not mention the gift from Jones. May approves the Koons' gift.

After talking with May, Garvey starts a research project on Zenith Enterprises, a frozen-juice maker. Garvey's gathers quarterly data on the company's sales and profits over the past two years. Garvey uses a simple linear regression to estimate the relationship between GDP growth and Zenith's sales growth. Next she uses a consensus GDP estimate from a well-known economic data reporting service and her regression model to extrapolate growth rates for the next three years.

Later that afternoon, Garvey attends a company meeting on the ethics of money management. She listens to a lecture in which John Bloomquist, a veteran portfolio manager, talks about his job responsibilities. Garvey takes notes that include the following three statements made by Bloomquist:

Statement 1: I'm not a bond expert, and I've turned to a colleague for advice on how to manage the fixed-income portion of client portfolios.

Statement 2: I strive not to favor either the remaindermen or the current-income beneficiaries, instead I work to serve both of their interests.

Statement 3: All of my portfolios have target growth rates sufficient to keep ahead of inflation.

Garvey is not working at the diner that night, so she goes home to work on her biography for an online placement service. In it she makes the following two statements:

Statement 1: I'm a CFA Level 3 candidate, and I expect to receive my charter this fall. The CFA program is a grueling, 3-part, graduate-level course, and passage requires an expertise in a variety of financial instruments as well as knowledge of the forces that drive our economy and financial markets.

Statement 1: I expect to graduate with my MBA from Braxton College at the end of the fall semester. As both an MBA and a CFA, I'll be in high demand. Hire me now while you still have the chance.

Does Garvey's acceptance of the gifts from Koons and Jones violate Standard 1(B) Independence and Objectivity?

Reveal Solution Hide Solution
Correct Answer: C

The Koons' gift does not violate Standard 1(B). According to the standard, gifts from clients are different from gifts from other parties because the potential for obtaining influence to the detriment of other clients is not as great. Therefore, according to the standard, Garvey may accept the Koons' gift as long as she discloses it to her employer, which she did. See Example 7 on pages 22 and 23 of the Standards of Practice Handbook, 9th edition^ for an example of how the standard was applied in a similar situation.


Question #2

Ernie Smith and Jama! Sims are analysts with the firm of Madison Consultants. Madison provides statistical modeling and advice to portfolio managers throughout the United States and Canada.

In an effort to estimate future cash flows and value the Canadian stock market. Smith has been examining* the country's aggregate retail sales. He runs two autoregressive regression models in an attempt to determine whether there are any patterns in the data, utilizing nine years of unadjusted monthly retail sales data. One model uses a lag one variable and the other adds a lag twelve variable. The results of both regressions are shown in Exhibits 1 and 2.

Sims has been assigned the task of valuing the U .S . stock market and uses data similar to the data that Smith uses for Canada. He decides, however, that the data should be transformed. He takes the natural log of the data and uses it in the following model:

Smith and Sims are concerned that the data for Canadian retail sales may be more appropriately modeled with an ARCH process. Smith states, that in order to find out, he would take the residuals from the original autoregressive model for Canadian retail sales and then square them.

Sims states that these residuals would then be regressed against the Canadian retail sales data using the

where e represents the residual terms from the original regression and X represents the Canadian retail sales data. If is statistically different from zero, then the regression model contains an ARCH process.

Smith also examines the quarterly inflation data for an emerging market over the past nine years. He models the data using an autoregressive model with a lag one independent variable which he finds is statistically different from zero. He wonders whether he should also include lag two and lag four terms, given the magnitude of the autocorrelations of the residuals shown in Exhibit 4, assuming a 5% significance level. The critical t-values, assuming a 5% significance level and 35 degrees of freedom, are 2.03 for a two-tail test and 1.69 for a one-tail test.

where: FF is the Federal Funds rate in the United States (US), and BY is the bond yield in the European Union (E) and Great Britain (B).

Before he runs this regression, he investigates the characteristics of the dependent and independent variables. He finds that the Federal Funds rate in the United States and the bond yield in Great Britain have a unit root but that the bond yield in the European Union does not. Furthermore, the Federal Funds rate in the United States and the bond yield in Great Britain are cointegrated but the Federal Funds rate in the United States and the bond yield in the European Union are not.

Regarding Smith's emerging market regression, should lag two and lag four terms be included in the regression?

Reveal Solution Hide Solution
Correct Answer: A

Neither the lag two term nor the lag four term should be included. To determine the significance of the autocorrelation of the residuals, we need the standard error, which is calculated as one over the square root of the number of observations. There are 36 quarters of inflation data. One quarter is lost because we have a lag one term, so there are 35 observations in the regression. Therefore, the standard error is = 0.1690.

The critical f-value is 2.03 for a two-tail test, so none of the ^-statistics indicate that the autocorrelations are significantly different from zero. Therefore we do not need to include additional lag terms. (Study Session 3, LOS 13.d)


Question #3

Viper Motor Company, a publicly traded automobile manufacturer located in Detroit, Michigan, periodically invests its excess cash in low-risk fixed income securities. At the end of 2009, Viper's investment portfolio consisted of two separate bond investments: Pinto Corporation and Vega Incorporated.

On January 2, 2009, Viper purchased $10 million of Pinto's 4% annual coupon bonds at 92% of par. The bonds were priced to yield 5%. Viper intends to hold the bonds to maturity. At the end of 2009, the bonds had a fair value of $9.6 million.

On July I, 2009, Viper purchased $7 million of Vega's 5% semi-annual coupon mortgage bonds at par. The bonds mature in 20 years. At the end of 2009, the market rate of interest for similar bonds was 4%. Viper intends to sell the securities in the near term in order to profit from expected interest rate declines.

Neither of the bond investments was sold by Viper in 2009.

On January 1,2010, Viper purchased a 60% controlling interest in Gremlin Corporation for $900 million. Viper paid for the acquisition with shares of its common stock.

Exhibit 1 contains Viper's and Gremlin's pre-acquisition balance sheet data.

Exhibit 2 contains selected information from Viper's financial statement footnotes.

The amount of goodwill Viper should report in its consolidated balance sheet immediately after the acquisition of Gremlin is closest to:

Reveal Solution Hide Solution
Correct Answer: C

Full goodwill method (in millions)

Fair value of Gremlin $1,500 (900 purchase price / 60% ownership interest)

Less: Fair value of Gremlins

identifiable net assets 1.100 (700 CA + 950 NCA - 250 CL - 300 LTD)

Goodwill $400

Partial goodwill method (in millions)

Purchase price $900

Less: Pro-rata share of Gremlin's

identifiable net assets at FV 660 (700 CA + 950 NCA - 250 CL - 300 LTD) x 60%

Goodwill $240

Goodwill is not created under the pooling method. (Study Session 5. LOS 21.b)


Question #4

Jenna Stuart is a financial analyst for Deuce Hardware Company, a U .S . company that reports its results in U .S . dollars. Wayward Distributing, Inc., is a foreign subsidiary of Deuce Hardware, which began operations on January 1,2007. Wayward is located in a foreign country and reports its results in the local currency called the Rho. Selected balance sheet information for Wayward is shown in the following table.

Stuart has been asked to analyze how the reported financial results of Wayward will be affected by the choice of the all-current or temporal methods of accounting for foreign operations. She has gathered the following exchange rate information on the $/Rho exchange rate:

* Spot rate on 1/01/08: $0.35 per Rho

* Spot rate on 12/31/08: $0.45 per Rho

* Average spot rate during 2008: $0.42 per Rho

Will the all-current method report a translation gain or loss for 2008, and will that gain or loss be reported on Deuce's income statement or the balance sheet?

Reveal Solution Hide Solution
Correct Answer: A

Exposure under the all-current method is equity. Beginning equity is positive ($4,000) and the change in equity during the year is positive ($6,000 - $4,000 = $2,000). Because the Rho appreciated during the year, the all-current method will report a translation gain for 2008. Under the all-current method gains and losses are reported as part of the cumulative translation adjustment in the equity section of the balance sheet. (Study Session 6, LOS 23.d,e)


Question #5

Mike Zonding, CFA, is conducting a background check on CFA candidate Annie Cooken, a freshly nudled MBA who applied for a stock-analysis job at his firm, Khasko Financiar.vZoftding does not like to hire anyone who does not adhere to the Code and Standards' professional conduct requirements.

The background check reveals the following:

(i) While doing a full-time, unpaid internship at Kale Investments, Cooken was reprimanded for working a 30-hour-a-week night job as a waitress.

(ii) As an intern at Lammar Corp., Cooken was fired after revealing to the FBI that one of the principals was embezzling from the firm's clients.

(iii) Cooken performed 40 hours of community service in relation to a conviction on a misdemeanor drug possession charge when she was 16 years old.

(iv) On her resume, Cooken writes, "Recently passed Level 2 of the CFA exam, a test that measures candidates' knowledge of finance and investing."

During the interview, Zonding asks Cooken several questions on ethics-related issues, including questions about the role of a fiduciary and Standard III(E) Preservation of Confidentiality. He asks her about her internship at Kale Investments, specifically about the working hours. Cooken replies that the internship turned out to require more time than she originally planned, up to 65 hours per week.

Zonding subsequently hires Cooken and functions as her supervisor. On her third day at the money management boutique firm, portfolio manager Steven Garrison hands her a report on Mocline Tobacco and tells her to revise the report to reflect a buy rating. Cooken is uncomfortable about revising the report.

To supplement the meager income from her entry-level stock-analysis job, Cooken looks for part-time work. She is offered a position working three hours each Friday and Saturday night tending bar at a sports bar and grill downtown. Cooken does not tell her employer about the job.

During her first week, Cooken has lunch with former MBA classmates, including Taira Basch, CFA, who works for the compliance officer at a large investment bank in town. Basch arrives late, explaining, "What a day, it's only noon and already I have worked on the following requests:

1. A federal regulator called and wanted information on potentially illegal activities related to one of the firm's key clients.

2. A rival company's employee wanted information regarding employment opportunities at the firm.

3. A potential client contacted an employee and wanted detailed performance records of client accounts so he can decide whether to invest with the firm."

Basch goes on to say that she is responsible for developing a presentation on the differences between the Prudent Investor and the Prudent Man rules for managing trust portfolios. Basch explains to Cooken that the Prudent Investor rule requires a trustee to exercise five fiduciary standards in managing the assets of a trust account, including care, skill, caution, loyalty, and impartiality. She states that although there are many differences between the Prudent Man and the newer Prudent Investor rule, one element of continuity is the duty of the trustee to delegate investment authority in the event that the trustee lacks sufficient investment knowledge.

Toward the end of the lunch meeting, Basch suggests that in exchange for research published by Cooken and Khasko, Basch can have portfolio managers at her firm send clients that are too small for their firm to Khasko. Since Khasko specializes in clients with smaller portfolios, the arrangement sounds like a good idea to Cooken. Cooken tells Basch that she will think the arrangement over and get back with her next week with a decision.

According to CFA Institute Standards of Professional Conduct, which of the following statements is most accurate with regard to the arrangement proposed by Basch to Cooken?

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Correct Answer: B

According to Standard VI(C) Referral Fees, members and candidates must disclose to their employer, clients, and prospective clients any compensarion, consideration, or benefit obtained from or given to other entities in exchange for referrals related to products or services. There is no prohibition on such arrangements as long as they are disclosed so clients and prospects can assess the full cost of services. (Study Session 1, LOS 2.a)



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