How Hard is the CFA Exam Levels I, II, and III?

Remember the days when a mere bachelor’s degree in finance would set you apart? In today’s competitive world, the CFA®  charter is what differentiates novices from experts.

So, for anyone thinking of becoming a Chartered Financial Analyst (CFA® ), the question that inevitably pops up is, “How hard is the CFA® exam, really?” While each person’s experience varies, there’s a consensus that the CFA®, with its three exams, is among the most challenging in the investment and finance sectors.

Why is this?

Well, we’ve got the answer plus tons of other info about the CFA®  exams, including historical CFA® exam pass rates, minimum passing score information, and tips for passing all CFA® -level exams. Consider these next sections a part of your portfolio of insights; it’s time to invest.

An Overview of the CFA®  Exams

From Wall Street to the bustling financial hubs of Hong Kong and London, one certification echoes as a hallmark of excellence: the Chartered Financial Analyst. Offered by the CFA®  Institute, the CFA® designation is a globally recognized certification in investment management.

The CFA®  exams necessary to receive this status span three levels. Level I, Level II, and Level III each test a candidate’s skills on various investment-related topics. As one progresses through each CFA® level, the CFA® exams test in-depth knowledge and application of the CFA® curriculum’s content.

CFA®  Level I Exam:

This is the gateway and consists mainly of multiple-choice questions. Key topics include financial reporting, quantitative methods, and corporate finance. Many candidates find it an adjustment as it’s an extensive review of diverse topics. It’s not just a test; it’s an endurance challenge.

What makes this one of the most challenging exams?

For the CFA®  Level 1 Exam, think of it like trying to binge-watch multiple TV series in different genres all at once. You’re not just tackling one topic but hopping across many, and the clock’s ticking. It’s like a TV marathon, but with numbers and theory. Even folks who’ve been around the finance block a time or two can find it a whirlwind!

CFA®  Level II Exam:

Here, the difficulty level ramps up. Test takers face item sets: vignettes followed by multiple-choice questions. Key areas like financial statements, fixed income, and portfolio management are explored in depth.

What makes this one of the most difficult exams?

For the CFA®  Level II Exam, imagine you’ve just leveled up in a video game. Instead of quick tasks, you’re now faced with complex missions: reading mini-stories (vignettes) and then answering tricky questions about them. Think of it as going from basic puzzles to 3D challenges, especially when diving deep into the worlds of financial statements and portfolio strategies. It’s more than just a sequel; it’s a whole new ballgame!

CFA®  Level III Exam:

This is where things get really intense. The level III exam integrates all the knowledge acquired from the previous levels. It focuses heavily on portfolio management and wealth planning. It also introduces constructed response questions, in which candidates must provide written answers.

What makes it hard to get a passing grade on this level of the CFA®  exam?

For the CFA®  Level III Exam, consider it like mastering a complex recipe. You’ve gathered your ingredients from the previous levels, and now it’s time to blend them, perfecting the art of portfolio management and wealth planning. And it’s not just about following the steps; you’ll be asked to explain your technique in detail through those constructed response questions. It’s the culinary school final, where every spice and every technique counts!

Which brings us to questions that lots of CFA®  program candidates ask: How hard are the CFA®  levels, and which of the three CFA®  exams are the hardest?

To examine this, we need to look at the pass rate data released by the CFA®  Institute.

Understanding the Pass Rate

The CFA®  Institute, which administers the Chartered Financial Analyst (CFA® ) exams, has traditionally published pass rates for each of its three levels (Level 1, Level 2, and Level 3) after every exam cycle. These pass rates represent the percentage of candidates who successfully passed that specific level of the exam during that particular exam cycle.

The term “historical pass rates” refers to the aggregated data of these pass rates over several years. This number typically hovers around 40%. This means that only 2 out of every 5 test takers will actually pass the CFA®  level exam they are sitting for.

By examining the historical pass rates:

  1. Trends Over Time: One can observe patterns or trends over time, such as whether the pass rate for a particular level has been rising, falling, or remaining relatively stable.
  2. Comparison Between Levels: Historical pass rates also provide insights into the relative difficulty of each level. For instance, it’s not uncommon to find that certain levels have consistently lower pass rates than others.
  3. Barometer of Difficulty: Many candidates and educators use these rates as an informal barometer of the exam’s difficulty. A lower pass rate might suggest that the exam was particularly challenging during a given year or that candidates may not have been adequately prepared.
  4. Implications for Candidates: Understanding historical pass rates can offer candidates insights into their chances of passing and the rigorous preparation they might need. For instance, if a level consistently has a low pass rate, a candidate might opt for more intensive study or seek additional resources.

However, it’s essential to approach historical pass rates with a nuanced perspective. While they provide a general idea of the exam’s difficulty, individual success will largely depend on a candidate’s preparation, background, and aptitude.

CFA® ® Level I Success Metrics

The CFA® ® Institute’s disclosed data reveals that the CFA® ® Level I exam for August 2022 had a pass rate of 37%. While scores for each candidate differ, the historical success rate has lingered around 41%. This data, among other factors, contributes to the widely held belief that Level I poses the greatest challenge of the three CFA® ® exams.

Metrics for CFA® ® Level II Exam

In its most recent round, the CFA® Level II recorded pass rates fluctuating between 40% and 42%. This is slightly below its long-standing average of 46%. One contributing factor to its unique challenge is the vignette-based questions, a departure from conventional test formats.

CFA® ® Level III Historical and Current Rates

The latest data indicates a 48% pass rate for the CFA® Level III. Looking back over its 59-year history, the average success rate has been 56%.

A common query among CFA® aspirants is the noticeably higher pass rate for Level III in comparison to its predecessors. A significant reason for this is the seasoned approach of the candidates: by the time they reach Level III, they appreciate the gravity of structured preparation and demonstrate unwavering commitment. However, this shouldn’t mislead one into believing that Level III is straightforward. Despite its relatively higher pass metrics, many find it daunting due to its extensive essay-based sections.

The Mystery of CFA® Institute’s Minimum Passing Score

You might be wondering: just how high of a score do I need to tackle the beast that is the CFA®  exam? Well, here’s the twist: We can’t give you a straight answer.

Here’s the scoop. While most exams out there have a clear cut-off point, the CFA® Institute plays it close to the vest. They don’t officially unveil the exact minimum passing score (MPS) for their exams. And to spice things up, the benchmark even shifts from one year to the next.

Let’s dive deeper into this enigma, though we’re largely navigating the fog here. Based on past trends and the limited data drops from the CFA® Institute, here are some educated guesstimates on the MPS:

CFA® Level I MPS Metrics

Over the last decade, the MPS for the CFA® Level I swayed between 56% and 74%. In 2022, the waters whispered an estimated MPS of 69%. Rewind to 2021, and it seems you needed a robust 72% MPS to earn those coveted chartered financial analyst stripes.

CFA® Level II MPS Insights

For CFA®  Level II, the MPS dance over the past ten years has spanned from 60% to 71%. By 2022’s standards, candidates needed to groove at an estimated 69.5% to pass. In 2021, the rhythm was a bit different, requiring an MPS of around 66.5%.

CFA® ® Level III MPS Mysteries

Between a window of ten years, the CFA® Level III MPS floated between 55% and 60%. The 2022 MPS estimate was around 59%, though 2021 throws a curveball due to tweaks in the exam structure.

Given the elusive nature of the CFA® Institute’s MPS reveal, a pro tip for all CFA® warriors: aim for the stars (or at least above 70%) to ensure you’re not just scraping by but conquering the challenge.

Ways to Make the CFA® Exam Easier

So, is there a way to make sure that you pass every level of the CFA® on the first attempt?

Preparation is Key

Many CFA® exam candidates report spending an average of 300 hours preparing for each exam level. That’s equivalent to dedicating almost eight full-time job weeks per level! A structured study plan is essential, and candidates should allocate ample time for practice questions to simulate actual exam questions.

The CFA® Institute’s website is a trove of resources, including sample exam questions, that can provide insight into the question format and most tested material. Unfortunately, this info alone usually isn’t enough.

You’ll need to invest in a CFA®  program to review and prepare for the three exams (Level I exam, Level II exam, and Level III exam). The best CFA®  exam prep programs include solid content, practice questions, mock exams, and more. Many of these CFA® program providers offer a money-back-guarantee and boast a CFA® curriculum that is so comprehensive, 300 hours of study time aren’t necessary.

Know Your Exam Topics

One of the things that makes the CFA® exam so difficult is the amount of information that you’re required to learn to pass. Here are some of the exam topics covered on these three exams.

Financial Reporting: The backbone of corporate evaluation. Aspiring analysts must have a deep understanding of balance sheets, income statements, and cash flow statements. It’s not just about understanding them individually, but also recognizing the interplay between them.

Quantitative Methods: This forms the foundation for many calculations in finance. Time value of money, hypothesis testing, and regression analysis are among the many concepts covered here. While it sounds statistical (and it is!), it’s crucial for accurate financial analysis.

Portfolio Management: The endgame for many analysts. It’s not just about picking the right stock, but understanding how stocks interact within a portfolio. Risk, return, and the correlation between assets play a pivotal role in this section.

Economics: At the heart of every financial decision is the basic understanding of economics. Candidates should grasp concepts like supply and demand, monetary policy, and macroeconomic factors that influence markets globally. Think of it as understanding financial weather patterns.

More Topics (Yes, it Continues)

Fixed Income: Bonds, and other debt instruments fall under this umbrella. It’s not as simple as lending money and earning interest. Duration, yield curves, and credit risk are all integral concepts that analysts need to understand deeply to make informed decisions.

Ethical and Professional Standards: The moral compass of the financial world. This isn’t just about knowing what’s right from wrong. It involves an intricate understanding of conflicts of interest, fiduciary duties, and the overarching principles that guide the financial industry. It’s the lighthouse guiding analysts through murky waters.

Alternative Investments: Beyond stocks and bonds, this dives into the world of real estate, commodities, and hedge funds. It’s about understanding less traditional assets and the unique risks and rewards they bring to the table.

Derivatives: These are financial contracts that derive their value from other assets. It’s a complex arena encompassing options, futures, and swaps. They can be powerful tools for hedging or amplifying returns, but they require a strong conceptual foundation.

Corporate Finance: This isn’t just about big businesses. It covers everything from capital budgeting decisions, cost of capital, and financial leverage. Imagine understanding the financial nuts and bolts that keep companies ticking and thriving.

Navigating the vast sea of topics in the CFA® exams requires more than just rote learning. It’s about understanding the intricate tapestry of finance, seeing the bigger picture, and then zooming in on the minute details. Consider it your financial detective training.

Know the Test Formats and Question Types

The progression from Level I to III isn’t just an increase in difficulty but also a change in question format.

Level I primarily uses multiple-choice questions. These test foundational knowledge and understanding.

Level II introduces item sets or mini-cases, which can be a handful. These require candidates to apply their knowledge in a more practical, scenario-based context.

Level III is the most unique, with its constructed response or essay-type questions. This format challenges candidates to articulate their thoughts coherently and apply their knowledge in comprehensive investment scenarios.

Final Thoughts

The Chartered Financial Analyst (CFA®) certification is today’s gold standard in the finance realm, known for its rigorous three-level examination system. Level I is a broad introductory test, akin to watching a blend of various TV genres; it’s about endurance and breadth. Level II deepens the complexity, much like advancing in a video game, requiring candidates to apply foundational knowledge to specific scenarios. Level III melds all prior knowledge into the art of portfolio management, akin to a chef mastering a complex recipe, including essay-type explanations.

Historically, only about 40% of test-takers pass each level, with the pass rates slightly increasing as you progress. Though the CFA® Institute never discloses an exact pass mark, aiming above 70% is advisable. With candidates spending around 300 hours on average preparing for each level, it’s clear: the CFA® is no stroll in the financial park, but with grit and preparation, it’s conquerable.


How hard is the CFA® Exam 1?

The CFA® Level I exam is challenging, covering a broad range of financial topics, and requires extensive preparation, with many candidates dedicating hundreds of hours to study.

Is CFA® harder than CPA?

Both the CFA® and CPA are rigorous, but they focus on different areas of finance and accounting. Comparing difficulty is subjective, as it often depends on one’s background and strengths; however, the CFA® is commonly perceived as more challenging due to its breadth in finance topics and lower overall pass rates.

What is the pass rate of the CFA® exam?

Historically, the pass rate for the CFA® exams hovers around 40% for each level, though this can vary slightly from year to year and between levels.

Is a CFA®  harder than an MBA?’

The difficulty of a CFA® and an MBA varies based on individual strengths and the specific program or curriculum. However, the CFA®  is a specialized designation focused on investment and financial analysis, requiring rigorous self-study and passing three exams, while an MBA is a broader degree covering various aspects of business.

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