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Aman and Arhaan are neighbors both studying for CFA. Aman has appeared for Level one while Arhaan has appeared for Level two. Both are waiting for their results. 

The result day is here and both of them successfully clear the exams. Aman goes to congratulate Arhaan

Aman: Congratulations Arhaan! Well deserved.

Arhaan: Thanks Aman and congratulations to you too. Now you will have to start preparing for Level two.

Aman: Ohh no. Not so soon there is ample time left. The subjects are similar. Moreover, my marks fall in the highest bracket for 8 out of ten subjects. So I am pretty confident that clearing Level two will not be a challenge for me.

Arhaan: Aman my scorecard for Level one was similar to yours but I had to work harder than what I did for level one. Even though the subjects are similar there is a huge difference is exam pattern, concepts and level of difficulty

Aman: Oh! I was unaware. Can you please spare some time and guide me. What are the major differences?

Arhaan: Sure.

1. Frequency: 

CFA Level 1Held twice a year in June and December
CFA Level 2Held once a year in June

2. Format of the Exam:

CFA Level 1Total of 240 multiple choice questions
CFA Level 2Total of 120 questions in case study format and a total of 21 case studies. 18 case study consists of six questions and three case studies with four questions. Morning and afternoon sessions have ten case studies each. You are expected to answer based on the information provided on the case study

 3. Nature of questions

CFA Level 1Questions are straightforward. For example – Based on the present and the future value calculate the rate of interest earned in five years.
CFA Level 2Questions in the Level two exams are somewhat tricky. For example, in level two you will be expected to identify the number of years or also identify the future value based on the parameters provided in the case study. Nothing is straightforward.

4. Exam Focus 

CFA Level 1The focus of the level one curriculum and exams is mainly on formulas and definitions.
CFA Level 2The focus of level two is on conceptual understanding and the ability to apply knowledge and analyze the provided financial data. The focus is more to test if you can apply a concept to the questions rather than recalling a formula. The candidate needs to understand the question, integrate the concepts and apply the concept all at the same time. Therefore, for Level two time management skills are very important.

5. Difficulty

CFA Level 1The focus of the level one curriculum and exams is mainly on formulas and definitions.
CFA Level 2The focus of level two is on conceptual understanding and the ability to apply knowledge and analyze the provided financial data. The focus is more to test if you can apply a concept to the questions rather than recalling a formula.Also, a lot of candidates believe that since they have studied Ethics in Level one and have cleared it successfully they need not study again. However that is not the case, the granularity at which Ethics is tested in Level one is different from Level two.

6. Complexity 

CFA Level 1The concepts in CFA level one are easier in comparison to level two. The curriculum mainly only touches the basic concepts of all asset classes.
CFA Level 2The focus of the level two curriculum is on valuations and deeper understanding of each topic. The curriculum is not only very large in scope but there are a lot of concepts that are difficult to grasp. Subjects that most students find difficult are the valuation of swaps, Black and Scholes model, CDS valuation, Binomial tree, etc.

7. Quality of Candidates

CFA Level 1This is one of the topmost differences. Anyone can sign up for CFA Level one
CFA Level 2Candidates who have passed the CFA Level one exams are only eligible to write the Level two exam. So almost everyone sitting in the exam hall is very serious about the exam and is equally competent to pass Level two and the competition is higher.

8. Subject Weightage

Level one has a fixed weightage and a fixed number of questions while for Level two questions may fall in a range.

9. Pass rate

Aman: Thanks Arhaan this was an eye-opener. I better start preparing for Level two as soon as possible.

Arhaan: Good Luck!

Conclusion

Studying for CFA Level one and Level two required a tremendous amount of hard work. Candidates who clear these Level one exam must understand the differences and prepare a proper plan or strategy accordingly. Clearing CFA Level one is the first stepping stone towards the charter while clearing CFA Level two is duty half done. Hope this article helped you identify the differences and the areas you need to focus on as a CFA Level two Candidate. 

Read more: Financial Modelling Certification – A Door Opener for Analysts in India