UniGeniusInvestment Analyst Level II Prep

Level II

The Level II exam format

Level II has 22 item sets: each is a vignette with 4 multiple-choice questions, 88 questions in all. You sit two sessions of 2 hours 12 minutes with 11 item sets each and an optional break between them.

Questions88, in 22 item sets of 4
TimeTwo sessions of 2 hours 12 minutes
Penalty for a wrong answerNone
2027 windowsMay, August and November

How the exam is built

  • 22 item sets of vignettes with 88 questions; 20 sets are scored and 2 are being trialled and are not scored.
  • Two sessions of 132 minutes, 11 sets each, with an optional break in between.
  • Questions are answered from the vignette. Each vignette states its topic and point value.
  • Topics are placed at random and can appear in either session.
  • There is no penalty for a wrong answer.
  • Financial Statement Analysis uses IFRS unless a question says US GAAP.

Topic weights

TopicShare of the exam
Quantitative Methods5 to 10%
Economics5 to 10%
Financial Statement Analysis10 to 15%
Corporate Finance5 to 10%
Equities10 to 15%
Fixed Income10 to 15%
Derivatives and Risk Management5 to 10%
Alternative Investments5 to 10%
Portfolio Construction10 to 15%
Ethical and Professional Standards10 to 15%

What it means for practice

A whole set is about 4.5% of the exam, so a topic weighted 10 to 15% usually brings two or three sets and a topic weighted 5 to 10% one or two. Practice whole item sets against the clock: 12 minutes a set keeps you on pace.

Try 4 questions

Question 1Exchange-traded funds
Item set: Penhallow Markets: ETF creation and redemption

Hana Kowalczyk is an ETF trader at Penhallow Markets, a broker-dealer that acts as an authorized participant (AP) for several exchange-traded funds. She monitors the gap between each fund's market price and its intraday net asset value (NAV) and trades when the gap exceeds her costs.

At 11:00 a.m. one day, the Corvane US Industrials ETF, which holds only US-listed stocks, shows the data in Exhibit 1. Kowalczyk can trade the ETF shares at the quoted price and can buy or sell the fund's underlying basket at the intraday NAV plus or minus her basket trading costs.

Exhibit 1. Corvane US Industrials ETF

Market price per share: $40.18

Intraday NAV per share: $40.00

Creation unit: 50,000 shares

Fixed creation or redemption fee per unit, paid to the fund: $600

Basket trading costs: 0.10% of the basket's value

Kowalczyk assumes that the market price and the NAV do not change while she completes the trade.

Later the same day, during US trading hours, she reviews the Corvane Japan Equity ETF, which is listed in the US and holds only stocks listed in Tokyo. The Tokyo market closed several hours earlier. Since then, US equities have rallied strongly on news of a global trade agreement. The Japan ETF is trading 1.2% above the NAV the fund published based on Tokyo closing prices.

A client of the firm, a taxable investor, asks Kowalczyk why an ETF tracking an index usually distributes fewer capital gains than a traditional mutual fund tracking the same index.

To exploit the gap in the Corvane US Industrials ETF, Kowalczyk should:
Question 2Exchange-traded funds
Item set: Penhallow Markets: ETF creation and redemption

Hana Kowalczyk is an ETF trader at Penhallow Markets, a broker-dealer that acts as an authorized participant (AP) for several exchange-traded funds. She monitors the gap between each fund's market price and its intraday net asset value (NAV) and trades when the gap exceeds her costs.

At 11:00 a.m. one day, the Corvane US Industrials ETF, which holds only US-listed stocks, shows the data in Exhibit 1. Kowalczyk can trade the ETF shares at the quoted price and can buy or sell the fund's underlying basket at the intraday NAV plus or minus her basket trading costs.

Exhibit 1. Corvane US Industrials ETF

Market price per share: $40.18

Intraday NAV per share: $40.00

Creation unit: 50,000 shares

Fixed creation or redemption fee per unit, paid to the fund: $600

Basket trading costs: 0.10% of the basket's value

Kowalczyk assumes that the market price and the NAV do not change while she completes the trade.

Later the same day, during US trading hours, she reviews the Corvane Japan Equity ETF, which is listed in the US and holds only stocks listed in Tokyo. The Tokyo market closed several hours earlier. Since then, US equities have rallied strongly on news of a global trade agreement. The Japan ETF is trading 1.2% above the NAV the fund published based on Tokyo closing prices.

A client of the firm, a taxable investor, asks Kowalczyk why an ETF tracking an index usually distributes fewer capital gains than a traditional mutual fund tracking the same index.

Kowalczyk's profit from one creation unit of the arbitrage is closest to:
Question 3Exchange-traded funds
Item set: Penhallow Markets: ETF creation and redemption

Hana Kowalczyk is an ETF trader at Penhallow Markets, a broker-dealer that acts as an authorized participant (AP) for several exchange-traded funds. She monitors the gap between each fund's market price and its intraday net asset value (NAV) and trades when the gap exceeds her costs.

At 11:00 a.m. one day, the Corvane US Industrials ETF, which holds only US-listed stocks, shows the data in Exhibit 1. Kowalczyk can trade the ETF shares at the quoted price and can buy or sell the fund's underlying basket at the intraday NAV plus or minus her basket trading costs.

Exhibit 1. Corvane US Industrials ETF

Market price per share: $40.18

Intraday NAV per share: $40.00

Creation unit: 50,000 shares

Fixed creation or redemption fee per unit, paid to the fund: $600

Basket trading costs: 0.10% of the basket's value

Kowalczyk assumes that the market price and the NAV do not change while she completes the trade.

Later the same day, during US trading hours, she reviews the Corvane Japan Equity ETF, which is listed in the US and holds only stocks listed in Tokyo. The Tokyo market closed several hours earlier. Since then, US equities have rallied strongly on news of a global trade agreement. The Japan ETF is trading 1.2% above the NAV the fund published based on Tokyo closing prices.

A client of the firm, a taxable investor, asks Kowalczyk why an ETF tracking an index usually distributes fewer capital gains than a traditional mutual fund tracking the same index.

The 1.2% premium on the Corvane Japan Equity ETF most likely reflects:
Question 4Exchange-traded funds
Item set: Penhallow Markets: ETF creation and redemption

Hana Kowalczyk is an ETF trader at Penhallow Markets, a broker-dealer that acts as an authorized participant (AP) for several exchange-traded funds. She monitors the gap between each fund's market price and its intraday net asset value (NAV) and trades when the gap exceeds her costs.

At 11:00 a.m. one day, the Corvane US Industrials ETF, which holds only US-listed stocks, shows the data in Exhibit 1. Kowalczyk can trade the ETF shares at the quoted price and can buy or sell the fund's underlying basket at the intraday NAV plus or minus her basket trading costs.

Exhibit 1. Corvane US Industrials ETF

Market price per share: $40.18

Intraday NAV per share: $40.00

Creation unit: 50,000 shares

Fixed creation or redemption fee per unit, paid to the fund: $600

Basket trading costs: 0.10% of the basket's value

Kowalczyk assumes that the market price and the NAV do not change while she completes the trade.

Later the same day, during US trading hours, she reviews the Corvane Japan Equity ETF, which is listed in the US and holds only stocks listed in Tokyo. The Tokyo market closed several hours earlier. Since then, US equities have rallied strongly on news of a global trade agreement. The Japan ETF is trading 1.2% above the NAV the fund published based on Tokyo closing prices.

A client of the firm, a taxable investor, asks Kowalczyk why an ETF tracking an index usually distributes fewer capital gains than a traditional mutual fund tracking the same index.

The ETF feature that most directly explains its lower capital gain distributions is:

Next step

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CFA Institute's Level II exam page

Questions people ask

How many questions are on Level II?

88 multiple-choice questions in 22 item sets, each a vignette with 4 questions.

How long is the Level II exam?

4 hours 24 minutes, in two sessions of 2 hours 12 minutes with an optional break between them.

How many answer choices does each question have?

CFA Institute's sample Level II item sets give three options, A to C, and our questions do the same.

Are all item sets scored?

No. CFA Institute says 20 sets are scored and 2 are being trialled and are not scored. You cannot tell which, so answer every set.