CFA Exam Question Formats

The CFA exams include three types of question formats.

The Level I exam is composed of multiple choice questions only.

The Level II exam is composed of item set questions only.

The Level III exam morning session is composed of essay questions and the afternoon session is composed of item set questions.

Multiple Choice
About the Level I Questions

The Level I exams include 240 total multiple choice questions, 120 on the morning session of the exam and 120 on the afternoon session. Each multiple choice question is free-standing (not dependent on other questions) and has three possible answers: A, B, and C. All questions are equally weighted and there is no penalty for guessing.

While you are taking the Level I multiple choice exam, remember:

  • Carefully manage your time. Don’t spend too much time on any one question or topic area. On average, you should allocate 1.5 minutes to each multiple choice question, including time to record your answer on the answer sheet.
  • Read the questions carefully. A careless “skimming” of the question may lead you to a completely different, and incorrect, answer.
  • Read each item carefully and eliminate obviously incorrect answers. If you have to guess and you can eliminate one of the responses, your odds of answering the question correctly are much higher. There is no penalty for guessing.
  • Mark your answers on the answer sheet as you complete each question. Some candidates mark their answers in the exam book and wait until the end of the exam to complete the answer sheet. This is not an advisable strategy.
  • Expect to encounter questions that you will not be able to answer correctly. There is a great deal of material to master and exam questions are challenging. Standard setters and the Board of Governors (at all three levels) take account of exam difficulty in setting Minimum Passing Scores. For a full description of how the MPS is established, see The CFA Program: Our Fifth Decade (PDF).
  • Examination writers use a standard set of formatting conventions on the multiple choice questions. Many sample exams produced by third parties do not follow these conventions, so review the CFA Institute format presented below.
  • Familiarize yourself with the instructions for filling out your answer sheet (PDF). Instructions are also available at the time of the exam.

Formatting Conventions Used for Level I Exams Item Construction

Each item on the Level I multiple choice exam consists of a stem (question, statement, and/or table) and three choices, A, B, and C.

Two basic formats are used:

  1. Stems using sentence completion with three unique choices
  2. Stems phrased as questions with three unique choices

Example 1 (Stem using sentence completion)

An analyst suspects that a particular company’s U.S. GAAP financial statements may require adjustment because the company uses take-or-pay contracts. The most likely effect of the appropriate adjustments would be to increase that company’s

A. return on assets.
B. debt-to-equity ratio.
C. interest coverage ratio.

Example 2 (Stem phrased as question)

An analyst suspects that a particular company’s U.S. GAAP financial statements may require adjustment because the company uses take-or-pay contracts. Which of the following is most likely to increase as a result of the appropriate adjustments being made to that company’s financial statements?

A. Return on assets.
B. Debt-to-equity ratio.
C. Interest coverage ratio.

Item Stems

The Level I CFA exam does not use except, true, or false in item stems and avoids the use of not in item stems whenever possible. When appropriate, stems will include one of the following qualifiers: most likely, least likely, best described, most appropriate, most accurate, least appropriate, or least accurate. Each stem supports only one item on the exam.

Choices

The Level I CFA exam does not use any of the following choices: all of the above, none of the above, A and B only, B and C only, cannot determine, cannot calculate, or not enough information to determine.

Choices consisting of words or sentences are typically ordered from shortest to longest; choices that are quantitative are ordered from the smallest number to largest number. The choices agree grammatically with the stem; language common to all choices is placed in the stem.

Item Sets
About the Level II and Level III Item Sets

The Level II CFA exam consists of 20 item sets — 10 on the morning session of the exam and 10 on the afternoon session. The Level III exam uses the essay format in the morning, and the item set format, with 10 item sets, in the afternoon.

Item sets are sometimes called “mini-cases.” Each item set on the CFA exam consists of a vignette (or case statement) and six multiple choice items (questions).

The length of a vignette ranges from about 1 page to 2.5 pages. The longer vignettes are those that include several tables of information, such as for a financial statement analysis, statistics, or fixed-income item set. The average length of the vignettes on the exam is about 1.5 pages.

The six items in each item set can only be answered based on the information in the vignette. Hence, the items are not free-standing (as in Level I), but are drawn from the vignette. You will need to read the vignette before answering the items, and you will need to refer back to the vignette for information. The six items can be answered independently of each other, but they do require information in the vignette.

On the Level II exam, you will have a total of 120 items (20 vignettes with 6 items each) compared to 240 multiple choice items on the Level I exam. The exam formats (including the essays at Level III) adapt to the changing topic focus and learning focus at each level. The topic focus on Level I is on investment tools, the topic focus on Level II is on asset valuation, and the topic focus on Level III is on portfolio management. The learning focus also changes, from knowledge and comprehension (Level I), to application and analysis (Level II), to synthesis and evaluation (Level III).

The Level II and III exams are graded for 360 points, corresponding to the number of minutes on the exam. The 120 Level II items are equally weighted, 3 points each, with no penalty for guessing. At Level III, the morning essay exam is 180 points and the afternoon item set exam is 180 points.

While you are taking the Level II or Level III item set exam, remember:

  • Read the formatting conventions for writing multiple choice questions at Level I. These same “best practices” are followed for item sets questions at Levels II and III.
  • Expect to go slower on the Level II exam than on Level I. You are answering 50 percent fewer questions, but spending twice as much time thinking about each one (including time for reading and analyzing the vignettes).
  • You may mark up your exam book. Circle or underline important information in the vignette and write down your equations or logic. However, only your final answers recorded on the answer sheets are graded. 
  • Mark your answers on the answer sheet as you complete each question. Some candidates mark their answers in the exam book and wait until the end of the exam to complete the answer sheet. This is not an advisable strategy.
  • If you do not know the answer to a question:
    • You might be able to eliminate one or more choices based on what you know about the topic. There is no penalty for guessing.
    • Use reasoning and logic. The concepts that you know on one topic often apply to another topic.
  • Expect to encounter questions that you will not be able to answer correctly. There is a great deal of material to master and exam questions are challenging. Standard setters and the Board of Governors (at all three levels) take account of exam difficulty in setting Minimum Passing Scores. For a full description of how the MPS is established, see The CFA Program: Our Fifth Decade (PDF).
Essay
About the Level III Essay Questions

The Level III essay exam is given in the morning session and has a maximum score of 180 points. The essay exam typically has 10–15 questions, and questions may have multiple parts. The points for each question and each question part are given in the exam.

  • Each essay question consists of one or more parts (A, B, C, etc.). Some parts direct you to write your answer in a template. Instructions in bold print immediately following the question direct you to the page number of each template. Answer all other questions on the lined page(s) following the question. For these questions, label each part of your answer clearly (A, B, C, or i, ii, iii, etc.)

The following are some general tips for Level III candidates on the essay exam:

  • The published guideline answers on past essay exams are more complete and better written than actual exam answers that receive full credit.
  • The published guideline answers may not reflect all alternative approaches to the question that received full or partial credit.
  • Answers are graded only on content. They are not graded for language and style.
  • Use short phrases and bullet points to save time, but be sure your meaning is clear.
  • Handwriting is rarely so poor that the answer cannot be graded.
  • Points are awarded for direct answers to a question.
  • No points are awarded for general knowledge that is not responsive to the question.
  • Do not spend too much time writing an answer. This is particularly tempting when you know the topic well. Formulate a direct response to the command words, and use the amount of time allotted.
  • You should expect to encounter questions that you will not be able to answer correctly. There is a great deal of material to master and exam questions are challenging. Standard setters and the Board of Governors (at all three levels) take account of exam difficulty in setting Minimum Passing Scores. For a full description of how the MPS is established, see The CFA Program: Our Fifth Decade (PDF).

Review the essay question format details

The following are common reasons that graders give for poor candidate performance on the essay portion of the Level III:

  • Not responsive to command word list (list, define, etc.)
  • Answered a question they wish they had been asked instead of the question that was asked.
  • No work shown on a calculation question and the answer is incorrect.
  • Hedged on questions that asked for a recommendation and justification (e.g., recommended A, but justified B).
  • Neglected to answer part of the question (especially if a several part question). Note that you can still answer part E, even if you do not know the answer to part D.
  • Content area experts spent too much time on their area of expertise, leaving too little time for weak areas.
  • Providing more items or responses than requested. If a question asks for three factors, only the first three that you list will be graded.