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CFA Level2 Vocab

Subjects : certifications, cfa
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • 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. The U.S. interest rate minus the foreign interest rate.






2. The square root of the average squared forecast error; used to compare the out-of-sample forecasting perfor-mance of forecasting models.






3. A record of the change in official reserves - which are the government's holdings offoreign currency.






4. A range that has a given proba-bility that it will contain the population parameter it is intended to estimate.






5. Common sharehold-ers' equity minus intangible assets from the bal-ance sheet - divided by the number of shares outstanding.






6. 1) An agent who executes orders to buy orsell securities on behalf of a client in exchange for a commission. 2) See Futures commission merchants.






7. Short-term obligations - such as accounts payable - wages payable - or accrued liabil-ities - that are expected to be settled in the near future - typically one year or less.






8. The status of a company in the sense of whether it is assumed to be a going con-cern or not.






9. A level of inventory beyond anticipated needs that provides a cushion in the event that it takes longer to replenish inventory than expected or in the case of greater than expected demand.






10. Arrangements that do not result in additional liabilities on the balance sheet but nonetheless create economic obligations.






11. FIrm model A model of stock valuation that views the value of a firm as the pres-ent value of expected future free cash flows to the firm.






12. Options that are far out-of-the-money.






13. The difference between operat-ing assets (total assets less cash) and operating lia-bilities (total liabilities less total debt).






14. Observations on characteristic(s) of the same observational unit through time.






15. A balance sheet asset that arises when an excess amount is paid for income taxes relative to accounting profit. The taxable income is higher than accounting profit and income tax payable exceeds tax expense. The company expects to recove r the differ






16. Ratios that measure a company's ability to meet its long-term obligations.






17. A general strategy usually thought of as reducing - if not eliminating - risk.






18. A procedure used in certain deriva-tive transactions that specifies that the long and short parties engage in the equivalent cash value of a delivery transaction.






19. The after-tax net operating profits as a percent of total assets or capital.






20. A merger in which one company ceases to exist as an identifiable entity and all its assets and liabilities become part of a purchasing company.






21. A value against which a computed test statistic is compared to decide whether to reject or not reject the null hypothesis.






22. In the con-text of private company valuation - valuation model based on an assumption of a constant growth rate of free cash flow to the firm or a con-stant growth rate of free cash flow to equity.






23. A legal contract specifYing the terms of a bond issue.






24. An asset that trades in a market in which buyers and sellers meet - decide on a price - and the seller then delivers the asset to the buyer and receives payment. The underlying is the asset or other derivative on which a particular derivative is base






25. Aka Harmonic mean.






26. Businesses with high sensitivity to business- or industry-cycle influences.






27. The number of successes in n Bernoulli trials for which the probability of success is constan t for all trials and the trials are independent.






28. The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or groups of assets.






29. The probability of the joint occur-rence of stated even ts.






30. Analysts who work at brokerages.






31. In the context of the Treynor-Black model - the portfolio formed by mixing analyzed stocks of perceived nonzero alpha values. This portfolio is ultimately mixed with the passive mar-ket index portfolio.






32. A specifi-cation of how 'value' is to be understood in the context of a specific valuation.






33. Options that relate to investment deci-sions such as the option to time the start of a proj-ect - the option to adjust its scale - or the option to abandon a project that has begun.






34. A statistical model used to clas-sifY borrowers according to creditworthiness.






35. A method of estimating VAR that uses data from the returns of the portfolio over a recent past period and compiles this data in the form of a histogram.






36. The existence of an exact linear relation between two or more independent vari-ables or combinations of independent variables.






37. The graph of the set of portfolios that have minimum variance for their level of expected return.






38. Liabilities related to expenses that have been incurred butnot yet paid as of the end of an accountingperiod-an example of an accrued expense is rent that has been incurred but not yet paid -resulting in a liability 'rent payable.'






39. The date of the final paymen on a swap' also - the swap's e piration date.






40. A commercial imple-mentation of the residual income concept; the computation of EVA® is the net operating profit after taxes minus the cost of capital - where these inputs are adjusted for a number of items.






41. A transaction between two affiliates - an investor company and an associate company such that the associate company records a profit on its income statement. An example is a sale of inven-tory by the associate to the investor company.






42. Investing on the basis of dif-ferential expectations.






43. A theory pertaining to a company's optimal capital struc-ture; the optimal level of debt is found at the point where additional debt would cause the costs of financial distress to increase by a greater amount than the benefit of the additional tax sh






44. A solvency ratio calculated as total debt divided by total assets.






45. The theory that managers take into account how their actions might be inter-preted by outsiders and thus order their prefer-ences for various forms of corporate financing. Forms of financing that are least visible to out-siders (e.g. - internally gen






46. Describes a distribution that is more peaked than a normal distribution.






47. American Free Trade Agreement An agree-ment - which became effective on January 1 - 1994 - to eliminate all barriers to international trade between the United States - Canada - and Mexico after a 15-year phasing-in period.






48. An active investment strategy whereby the timing of cash outflows is not matched with investment maturities.






49. Residual income after the forecast horizon.






50. The present discounted value of future cash flows: For assets - the present dis-counted value of the future net cash inflows that the asset is expected to generate; for liabilities - the present discounted value of the future net cash outflows that a