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Test your basic knowledge |
CFA Level2 Vocab
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. With reference to statistical infer-ence - the subdivision dealing with the testing ofhypotheses about one or more populations.
Manufacturing resource planning (MRP)
Hypothesis testing
Tenor
Qualifying special purpose entities
2. Increases in economic benefits in the form of inflows or enhancements of assets - or decreases of liabilities that result in an increase in equity (other than increases resulting from contribu-tions by owners) .
Conditional variances
Bonding costs
Income
Solvency
3. A probability based on logical analysis rather than on observation or personal judgment.
Pull on liquidity
Financial leverage
A priori probability
Account format
4. The establishment of objectives for individuals - groups - or divisions of an organiza-tion that takes into account the allocation of an acceptable level of risk.
Declaration date
Risk budgeting
Performance appraisal
No-growth value per share
5. The graphical representation of a model of asset price dynamics in which - at each period - the asset moves up wi t probability p or down with probability (I - p).
Cost of preferred stock
Duration
Binomial tree
Sovereign yield spread
6. The residuals from a fitted time-series model within the sample period used to fit the model.
In-sample forecast errors
ackwardation
Forward dividend yield
Treasury stock method
7. A company's operating profit with adjustments to normalize the effects of capital structure.
Partnership
Du Pont analysis
Net operating profit less adjusted taxes - or NOPLAT
Current cost
8. The risk attributed to the operating cost structure - in particular the use of fixed costs in operations; the risk arising from the mix of fixed and variable costs; the risk that a company's operations may be severely affected by environ-mental - soc
Residual income model (RIM) (also discounted ahnormal earnings model or Edwards-Bell-Ohlson model)
Statistical factor models
Operating risk
Type II error
9. The restatement of financial statement items using a common denominator or reference item that allows one to identify trends and major differences; an example is an income statement in which all items are expressed as a percent of revenue.
Common-size analysis
Cost of debt
Bear spread
Node
10. A public document that provides the material facts concerning matters on which shareholders will vote.
Proxy statement
Float factor
Platykurtic
NPV rule
11. Accounting method in which the only relevant transactions for the financial statements are those that involve cash.
Industry structure
Root mean square(l er ror (RMSE)
Time value or speculative value
Cash basis
12. A subset of a larger popula-tion created in such a way that each element of the population has an equal probability of being selected to the subset.
Probability distribution
Simple random sample
Assignment of accounts receivable
NPV rule
13. Securities held by a company with the intent to trade them.
Single-step format
Market price of risk
Trading securities (held-for-trading securities)
Takeover
14. Common-size analysis using only one reporting period or one base financial state-ment; fo r example - an income statement in which all items are stated as percentages of sales.
Protective put
Point of sale
Deliveryoption
Vertical analysis
15. An approach to valuing natu-ral resource companies that estimates company value on the basis of the market value of the natu-ral resources the company controls.
Qualifying special purpose entities
Interest rate forward
Asset-based valuation
Residual claim
16. A method for accounting forthe effect of convertible securities on earnings pershare (EPS) that specifies what EPS would havebeen if the convertible securities had been con-verted at the beginning of the period - taking account of the effects of conv
Direct sales-comparison approach
Intangible assets
Probability density function
If-converted method
17. Aka 'Market efficiency. '
Market approach
Comparables (comps - guideline assets - guideline com-panies)
Subsistence real wage rate
Rational efficient markets formulation
18. The principle that dol-lar amounts indexed at the same point in time are additive.
Financial risk
Cash flow additivity principle
Time series
Unearned fees
19. An extra return that compen-sates investors for the possibility that the borrower will fail to make a promised payment at the con-tracted time and in the contracted amount.
Noncurrent assets
Default risk premium
Conglomerate merger
Dividends per share
20. An investment decision rule that accepts projects or investments for which the IRR is greater than the opportunity cost of capital.
Capped swap
IRR rule
Projected unit credit method
Company fundamental factors
21. An ordered listing.
Chain rule of forecasting
Permutation
Assets
Node
22. A mean computed after excluding a stated small percentage of the lowest and highest observations.
Strap
Captive rmance subsidiary
Active factor risk
Trimmed mean
23. The relationship between the price of the underlying and an option's exercise price.
Internal rate of return (IRR)
Revaluation
Moneyness
Price to sales
24. An international organi-zation that places greater obligations on its mem-ber countries to observe the GATT rules.
World Trade Organization
Future value (FV)
Sarbanes-Oxley Act
Breakup value or private market value
25. Method used to estimate the overall capitalization rate by dividing the sale price of a comparable income property into the net operating income.
Trend
Parameter instability
Market-extraction method
Top-down forecasting approach
26. The periodic investment of a fixed amount of money.
Pecking order theory
Commodity forward
Cost averaging
Asset-based approach
27. Financial statements in which all elements (accounts) are stated as a per-centage of a key figure such as revenue for an income statement or total assets for a balance sheet.
Income tax paid
Gross income multiplier (GIM)
Common size statements
Rational efficient markets formulation
28. A set of observations on a variable's out-comes in different time periods.
Build-up method
Mutually exclusive events
Exercise rate or strike rate
Time series
29. A poison pill takeover defense that dilutes an acquirer's ownership in a target by giv-ing other existing target company shareholders the right to buy additional target company shares at a discount.
Log-log regression model
Flip-in pill
Continuous random variable
Salvage value
30. The average return in excess of the risk-free rate divided by the standard deviation of return; a measure of the average excess return earned per unit of standard deviation of return.
Power of a test
Sharpe ratio
Sample excess kurtosis
Operations risk or operational risk
31. A rule explaining the expected value of a random vari-able in terms of expected values of the random variable conditional on mutually exclusive and exhaustive scenarios.
Number of days of receivables
Total probability rule for expected value
Interest rate call
Cyclical businesses
32. Regulation that seeks to keep the rate of return in the industry at a com-petitive level by not allowing excessive prices to be charged.
Mutually exclusive projects
Synthetic forward contract
Rate-of-return regulation
Cost recovery method
33. The allocation of funds to rela-tively long-range projects or investments.
Capital budgeting
Days of inventory on hand (DOH)
Cost of capital
Free cash flow to the
34. Method of managing inventory that minimizes in-process inventory stocks. kth order autocorrelation The correlation between observations in a time series separated by k periods.
Just-in-time method
Lower bound
Asset purchase
Historical simulation (or back simulation)
35. Under U.S. GAAP - a measure used in estimating a defined-benefit pen-sion plan's liabilities - defined as 'the actuarial present value of benefits (whether vested or non-vested) attributed by the pension benefit formula to employee service rendered b
Estimation
Type I error
Accumulated benefit obligation
Accounts receivable turnover
36. A swap in which the underlying is a commodity such as oil - gold - or an agricultural product.
Commodity swap
Replacement value
Strap
Floating-rate loan
37. A function with non-negative values such that probability can be described by areas under the curve graphing the function.
Probability density function
P Value
Net borrower
Captive rmance subsidiary
38. With reference to fundamental factor models - the value of the attribute for an asset minus the average value of the attribute across all stocks - divided by the standard deviation of the attribute across all stocks.
Holder-of-record date
Futures commission merchants (FCMs)
General Agreement on Tariffs and Trade
Standardized beta
39. The calculation of returns in a logical and consistent manner.
Performance measurement
Prior transaction method
Total probability rule
Law of one price
40. Costs of inven tories including costs of purchase - costs of conversion - other costs to bring the inventories to their present location and condition - and the allocated portion of) fixed production overhead costs.
Capitalized inventory costs
Built-up method
Portfolio selection/composition problem
Bond-equivalent yield
41. The average rate of return in excess of the risk-free rate.
Model specification
Mean excess return
Free cash flow to equity
Available-for-sale investments
42. An algorithm that pro-duces uniformly distributed random numbers between 0 and 1.
Recapture premium
Bernoulli trial
Income tax recoverable
Random number generator
43. Unearned fees are recognized when a company receives cash payment for fees prior to earning them.
Rule of 72
Unearned fees
Debt rating approach
Nonearning assets
44. The absorption of one company by another; two companies become one entity and one or both of the pre-merger companies ceases to exist as a separate entity.
Money market
Pure factor portfolio
Merger
Enhanced derivatives products companies (EDPC)
45. The first date that a share trades without (i.e. - 'ex') the dividend.
Breakup value or private market value
Ex-dividend date
ecurity market line (SML)
Covered call
46. Unsecured short-term corporate debt that is characterized by a single payment at maturity.
Commercial paper
Alternative hypothesis
Justified price multiple (or warranted price multiple or intrinsic price multiple)
Momentum indicators
47. A dividend payout pol-icy under which earnings in excess of the funds necessary to finance the equity portion of com-pany's capital budget are paid out in dividends.
Measurement scales
Residual dividend approach
Return on equity (ROE)
Quick ratio - or acid test ratio
48. The currency in which finan-cial statement amounts are presented.
Floating-rate loan
Presentation currency
Subsidiary merger
Accumulated benefit obligation
49. The volatility that option traders use to price an option - implied by the price of the option and a particulau option-pricing model.
Swap
Synthetic put
London Interbank Offer Rate (LIBOR)
Implied volatility
50. Long-term assets with physical sub-stance that are used in company operations - such as land (property) - plant - and equipment.
Off-market
Tangible assets
Standard cost
Asset beta