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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. The single-period interest rate for a completely risk-free security if no infla-tion were expected.
Qualitative dependent variables
Scenario analysis
Backtesting
Real risk-free interest rate
2. Investigation and analysis in support of a recommendation; the failure to exercise due diligence may sometimes result in liability accord-ing to various securities laws.
Neoclassical growth theory
Due diligence
Univariate distribution
Independent
3. An annuity having a first cash flow that is paid immediately.
Mispricing
Annuity due
Indirect format (indirect method)
Income approach
4. The differ-ence between net operating assets at the end and the beginning of the period.
Upstream
Variable costs
Opportunity set
Balance-sheet-based aggregate accruals
5. The expected return on an invest-ment minus the risk-free rate.
Storage costs or carrying costs
Classified balance sheet
Risk premium
Offsetting
6. The net amount of cash provided from operating activities.
Bear hug
Cash flow from operations (cash flow from operating activities or operating cash flow)
Degree of total leverage
Cumulative relative frequency
7. The risk of loss from failures in a company's systems and proce-dures (for example - due to computer failures or human failures) or events completely outside of the control of organizations (which would include 'acts of God' and terrorist actions) .
Price limits
Operations risk or operational risk
Excess kurtosis
Inventory
8. Debt or equity financial assets bought with the inten-tion to sell them in the near term - usually less than three months; securities that a company intends to trade.
Interest rate floor or floor
Held-for-trading securities (trading securities)
Securities Act of 1933
Valuation
9. Mutually exclusive proj-ects compete directly with each other. For example - if Projects A and B are mutually exclusive - you can choose A or B - but you cannot choose both. n Factorial For a positive integer n - the product of the first n positive i
Proportionate consolidation
Constant maturity treasury or
Mutually exclusive projects
Monitoring costs
10. A floating-rate note or bond in which the coupon is adjusted at a multiple of a benchmark interest rate.
Leveraged floating-rate note or leveraged floater
Abnormal earnings
White sqnire
Credit risk or default risk
11. The strategy of using futures contracts to enter the market without an immediate outlay of cash.
Sample statistic or statistic
Fixed-income forward
Pre-investing
Earnings game
12. With reference to a transaction or a security - one that would increase earnings per share (EPS) or result in EPS higher than the com-pany's basic EPS-antidilutive securities are not included in the calculation of diluted EPS.
Antidilutive
Real exchange rate
Units-of-production method
ecurity market line (SML)
13. The price paid to buy an asset.
Entry price
Sarbanes-Oxley Act
Investing activities
Survey approach
14. The currency in which finan-cial statement amounts are presented.
Transactions motive
Percentiles
Adjusted present value (APV)
Presentation currency
15. The standard deviation of the differ-ence in returns between an active investment portfolio and its benchmark portfolio; also called tracking error volatility - tracking risk - and active risk.
Tracking error
Adjusted present value (APV)
Interest rate floor or floor
Independent and identically distributed (l
16. A synonym for robust standard errors.
Tenor
Stock grants
Sampling plan
White-corrected standard errors
17. A financial state-ment that reconciles beginning-of-period ana end-of-period balance sheet values of retained income; shows the linkage between the balance sheet and income statement.
Purchasing power parity
Trimmed mean
Statement of retained earnings
Giro system
18. 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.
Vertical analysis
Opportunity cost
Equity forward
Income tax payable
19. The amount for which one can sell some-thing - or the amount one must pay to acquire something.
Delta hedge
Gross income multiplier (GIM)
Value
P Value
20. A money measure of the goods and services produced within a country's borders over a stated time period.
Gross domestic product
Sample standard deviation
Face value (also principal - par value - stated value - or maturity value)
External growth
21. The estimated cost of equity capital in money terms.
Free cash flow to equity model
Statistical factor models
Equity charge
Binomial model
22. The risk of a change in value of a n asset or liability denomi-nated in a foreign currency due to a change in exchange rates.
Passive strategy
Exposure to foreign exchange risk
Pooling of interests accounting method
Differential expectations
23. In reference to short-term cash management - it is an investment strategy charac-terized by simple decision rules for making daily investments.
Passive strategy
LIFO method
Capital asset pricing model (CAPM)
Other receivables
24. The amount of money a buyer pays and seller receives to engage in an option transaction.
Horizontal analysis
Cost-of-service regulation
Catalyst
Option price - option premium - or premium
25. An agreement between two parties to exchange a series of future cash flows.
Modal interval
Swap
Cnsistent
Before-tax cash flow
26. Financial ratios involving bal-ance sheet items only.
Balance sheet ratios
Bond-equivalent basis
Investment constraints
Longitudinal data
27. A rate of return that reflects the rela-tionship between differently dated cash flows; a discount rate.
Interest rate
Put-call parity
Molodovsky effect
Trade-weighted index
28. 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.
Cross-sectional data
Common size statements
Credit scoring model
Vertical analysis
29. An event or piece of information that causes the marketplace to re-evaluate the prospects of a company.
Catalyst
Default risk premium
Gains
Segment debt ratio
30. The period benefited~y the employee's service - usually th e period between the grant date and the vesting date.
Target balance
Service period
Other receivables
Dealing securities
31. An estimate of the average number of days it takes deposited checks to clear; average daily float divided by average daily deposit.
Interest rate floor or floor
Quick assets
Float factor
Median
32. A type of interest rate swap in which the floating payment is set at the end of the period and the interest is paid at that same time.
Arithmetic mean
Credit
Perpetuity
Arrears swap
33. A swaption that allows the holder to enter into a swap as the fixed-rate payer and floating-rate receiver.
Fundamentals
Sales risk
Historical method
Payer swaption
34. A con-flict of interest that arises when the agent in an agency relationship has goals and incentives that differ from the principal to whom the agent owes a fiduciary duty.
Population standard deviation
Bernoulli random variable
Accounts receivable turnover
Agency problem - or principal-agent problem
35. The process of systematically allocat-ing the cost of long-lived (tangible) assets to theperiods during which the assets are expected toprovide economic benefits.
Earnings at risk (EAR)
Free cash flow hypothesis
Securities offering
Depreciation
36. A test that is not concerned with a parameter - or that makes minimal assumptions about the population from which a sam Ie comes.
Nonparametric test
Binomial random variable
Time value of money
Total return swap
37. A variation of a forward contract that has essentially the same basic definition but with some additional features - such as a clearing-house guarantee against credit losses - a daily settlement of gains and losses - and an organized electronic or fl
Mean
Benchmark value of the multiple
Futures contract
Rate-of-return regulation
38. The required rate of return on com-mon stock.
Cost of equity
Sharpe ratio
Legal risk
Orderly liquidation value
39. The ability to terminate a proj-ect at some future time if the financial results are disappointing.
Abandonment option
Currency option
Delta hedge
Going-concern assumption
40. Approach that values a private company based on the values of the underlying assets of the entity less the value of any related liabilities.
Subsistence real wage rate
Futures exchange
Asset-based approach
Going-concern assumption
41. Costs (e.g. - executives' salaries) that cannot be directly matched with the timing of rev-enues and which are thus expensed immediately.
Period costs
Cash
Trailing P/E (or current PIE)
Discounted cash flow analysis
42. Public-company com-parables for the company being valued.
Required rate of return
Long-term debt-ta-assets ratio
Guideline public companies
European-style option or
43. 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.'
Commodity forward
Platykurtic
Accrued expenses (accrued liabilities)
Current account
44. The return that an investorearns during a specified holding period; a syn-onym for total return.
Mixed offering
Active risk
Discount interest
Holding period return
45. The process of allocating the cost of intangible long-term assets having a finite useful life to accounting periods; the allocation of the amount of a bond premium or discount to the periods remaining until bond maturity.
Inventory blanket lien
Amortization
Long-lived assets (or long-term assets)
Prepaid expense
46. A feature of futures markets in which futures prices provide valuable information about the price of the underlying asset.
Price discovery
Real exchange rate
Liruit down
Method based on forecasted fundamentals
47. In reference to mergers - it is the savings achieved through the consolidation of operations and elimination of duplicate resources.
Economies of scale
Credit
Buy-side analysts
Cash price or spot price
48. The expected excess return on the market over the risk-free rate.
Zero-cost collar
Equity charge
Event
Market risk premium
49. The process of valuing long-lived assets at fair value - rather than at cost less accumulated depreciation. Any resulting profit or loss is either reported on the income statement and/or through equity under revaluation surplus.
Revaluation
Joint probability
Economic exposure
A priori probability
50. The use of inven-tory as collateral for a loan; similar to a trust receipt arrangement except there is a third party (i.e. - a warehouse company) that supervises the inventory.
Warehouse receipt arrangement
Face value (also principal - par value - stated value - or maturity value)
Autocorrelation
Present value model or discounted cash flow model
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