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CFA Level II Practice Test 2026-2027 and Free Sample Questions

2026-2027 exam practice page

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CFA Level II

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Question 1 Equity valuation - dividend discount models

Question 1: Equity valuation - dividend discount models

A company is expected to pay a dividend of 2.50 dollars next year. Dividends are expected to grow at a constant 4 percent indefinitely. If the required return on equity is 9 percent, what is the intrinsic value per share using the Gordon growth model?

Question 2 Equity valuation - free cash flow

Question 2: Equity valuation - free cash flow

When valuing a firm using free cash flow to the firm (FCFF), which discount rate should be applied?

Question 3 Fixed income - bond valuation

Question 3: Fixed income - bond valuation

An option-free bond is trading at a premium to par. Which of the following relationships is correct?

Question 4 Fixed income - interest rate risk

Question 4: Fixed income - interest rate risk

A bond has an effective duration of 6.5 and an effective convexity of 80. If interest rates rise by 100 basis points, what is the estimated percentage change in the bond's price?

Question 5 Derivatives - forward and futures pricing

Question 5: Derivatives - forward and futures pricing

Under the cost-of-carry model, the no-arbitrage forward price of an asset that pays no income increases with which of the following?

Question 6 Derivatives - option valuation

Question 6: Derivatives - option valuation

In the binomial option pricing model, the risk-neutral probability of an upward move is used to value an option because it allows the analyst to:

Question 7 Financial reporting - intercorporate investments

Question 7: Financial reporting - intercorporate investments

An investor company owns 30 percent of an investee and exercises significant influence but not control. Which accounting method should the investor generally use?

Question 8 Financial reporting - business combinations

Question 8: Financial reporting - business combinations

In a business combination accounted for under the acquisition method, goodwill is measured as:

Question 9 Corporate finance - cost of capital

Question 9: Corporate finance - cost of capital

A firm has a target capital structure of 40 percent debt and 60 percent equity. Its before-tax cost of debt is 7 percent, its cost of equity is 12 percent, and the marginal tax rate is 25 percent. What is the firm's weighted average cost of capital?

Question 10 Corporate finance - capital budgeting

Question 10: Corporate finance - capital budgeting

When evaluating two mutually exclusive projects of unequal size, the net present value rule and the internal rate of return rule may conflict. In such a conflict, which decision criterion is generally preferred?

Question 11 Equity valuation - price multiples

Question 11: Equity valuation - price multiples

An analyst is comparing two firms in the same industry using the trailing price-to-earnings ratio. One firm reported a large nonrecurring gain in the most recent year. To make the comparison more meaningful, the analyst should:

Question 12 Fixed income - credit analysis

Question 12: Fixed income - credit analysis

A widening of a corporate bond's credit spread relative to a benchmark government bond of the same maturity most likely indicates:

Question 13 Financial reporting - pensions

Question 13: Financial reporting - pensions

For a defined benefit pension plan, an increase in the discount rate used to value the obligation will generally:

Question 14 Equity valuation - residual income

Question 14: Equity valuation - residual income

In the residual income model, residual income for a period is best defined as:

Question 15 Derivatives - swaps

Question 15: Derivatives - swaps

At initiation of a plain vanilla interest rate swap, the fixed rate is set so that the value of the swap to both counterparties is:

Question 16 Financial reporting - financial analysis techniques

Question 16: Financial reporting - financial analysis techniques

Using DuPont analysis, return on equity is decomposed into net profit margin, total asset turnover, and:

Question 17 Equity valuation - industry and company analysis

Question 17: Equity valuation - industry and company analysis

In Porter's five forces framework, a high threat of new entrants into an industry generally:

Question 18 Corporate finance - share repurchases

Question 18: Corporate finance - share repurchases

A company has 1,000,000 shares outstanding trading at 20 dollars per share. It uses 2,000,000 dollars to repurchase shares in the open market at the current price. Assuming no other changes, what is the effect on the remaining shareholders' wealth per share?

Question 19 Fixed income - term structure

Question 19: Fixed income - term structure

Under the pure (unbiased) expectations theory of the term structure, a long-term interest rate is best interpreted as:

Question 20 Financial reporting - quality of earnings

Question 20: Financial reporting - quality of earnings

An analyst notices that a company's net income is growing steadily while its cash flow from operations is stagnant or declining over several years. This divergence is most likely a signal of:

Question 1 of 20
About this practice test

What this 2026-2027 CFA Level II Practice Test covers

This page currently provides a free diagnostic sample. The paid bank is not available during editorial and source review.

50 of 300 paid questions are currently stored. Reopening requires 300 unique questions plus reviewed answers, rationales, analogies, sources, and study links.

Work through up to 50 CFA Institute-style questions built around suitability, risk tolerance, and the wording patterns students usually miss on the first read.
Use answer-by-answer rationales to learn why the correct option wins and why weaker distractors fail in Financial exam situations.
Review 3 real-world analogies, topic article cards, and source checks after each question so recordkeeping and ethics feel easier to recognize under pressure.
Build timing, confidence, and recall with scenario-based practice that feels closer to the real CFA Level II than a generic flashcard dump.

Prepare for the CFA Level II with realistic CFA Institute practice questions, timed review, detailed rationales, and real-world analogies that make harder Financial concepts easier to remember.

This practice test is designed for students and professionals preparing for CFA Level II who want stronger exam-day confidence, better explanation quality, and more useful answer review than a generic test bank.

Focus areas include suitability, risk tolerance, recordkeeping, ethics, along with scenario-based judgment, careful review of why distractors are less correct, and real-world analogies that help the key ideas stick.

What you will practice on this page

  • Work through up to 50 CFA Institute-style questions built around suitability, risk tolerance, and the wording patterns students usually miss on the first read.
  • Use answer-by-answer rationales to learn why the correct option wins and why weaker distractors fail in Financial exam situations.
  • Review 3 real-world analogies, topic article cards, and source checks after each question so recordkeeping and ethics feel easier to recognize under pressure.
  • Build timing, confidence, and recall with scenario-based practice that feels closer to the real CFA Level II than a generic flashcard quiz.

How to use this exam to study smarter

  1. Start with the 20-question free sample to spot whether suitability or risk tolerance is slowing you down before you buy the full exam.
  2. After each block, review every rationale and the 3 real-world analogies, topic article cards, and source checks so the tested pattern behind recordkeeping becomes easier to remember.
  3. Retake the full CFA Level II practice test in timed mode and focus on cleaner decision-making, not just memorizing the last answer.

Students often land on this page after searching for terms like CFA Level II practice test, CFA Level II practice questions, CFA Level II free practice test, CFA Level II study guide, CFA Institute CFA Level II practice test, CFA Level II suitability questions. That is why the free sample gives you 10 questions first and the full version goes deeper into the tested patterns.

Frequently asked questions

Is paid access currently available for this exam?

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No practice resource can guarantee a passing score. Use practice results to identify weak topics and confirm important facts against the current official exam outline and authoritative sources.

Question-linked study articles

Study articles that support CFA Level II prep

These guides come from this exam's question topics. Use them after a missed question to review the concept, answer reasoning, distractors, and sources.

PracticeTestVault review illustration for Suitability on CFA Level II Review: Suitability

Question topic: Suitability

CFA Level II Review: Suitability

July 16, 2026 2 min read

Review suitability for this CFA Level II question with the key prompt clue, correct-answer reasoning, distractor checks, and sources to verify next.

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PracticeTestVault review illustration for Ethics on CFA Level II Review: Ethics

Question topic: Ethics

CFA Level II Review: Ethics

July 16, 2026 2 min read

Review ethics for this CFA Level II question with the key prompt clue, correct-answer reasoning, distractor checks, and sources to verify next.

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PracticeTestVault review illustration for Study strategy on CFA Level II Review: Study strategy

Question topic: Study strategy

CFA Level II Review: Study strategy

July 16, 2026 2 min read

Review study strategy for this CFA Level II question with the key prompt clue, correct-answer reasoning, distractor checks, and sources to verify next.

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