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Test your basic knowledge |
CFA Level2 Vocab
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Study First
Subjects
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certifications
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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. A theory of regulatory behavior that holds that regulators must take account of the demands of three groups: legislators - who established and oversee the regulatory agency; firms in the regulated industry; and consumers of the regulated indus-try's
Voluntary export restraint
Foreign currency
Share-the-gains - share-the-pains theory
Current exchange rate
2. A test in which the null hypothesis is rejected only if the evidence indicates that the population parameter is greater than (smaller than) eo- The alternative hypothesis also has one side.
Sharpe ratio
Market-oriented investors
One-sided hypothesis test (or one-tailed hypothesis test)
Active factor risk
3. The owners' remaining claim on the company's assets after the liabilities are deducted.
Residual claim
Nominal rate
Payment date
Fixed-rate perpetual preferred stock
4. The perceived ability of the bor-rower to pay what is owed on the borrowing in a timely manner; it represents the ability of a com-pany to withstand adverse impacts on its cash flows.
Option
Held-for-trading securities (trading securities)
Creditworthiness
Overnight index swap (OIS)
5. Is Derivatives in which the payoffs occur if a specific event occurs; generally referred to as options.
Quality of earnings analysis
Leverage
Contingent clain
Error autocorrelation
6. An activity ratio equal to rev-enue divided by average receivables.
Sample
Receivables turnover
Ratio spread
Leptokurtic
7. The ratio of P I E-ta-growt - calculated as the stock's P /.E divided by the expected earnings growth rate in percent.
Quota
Project sequencing
PEG ratio
Bear hug
8. A reduction in proportional ownership inter-est as a result of the issuance of new shares.
Dilution
Operating profit (operating income)
Free cash flow to the
Quintiles
9. The variable whose variationabout its mean is to be explained by the regres-sion; the left-hand-side variable in a regressionequation.
Market-oriented investors
Dependent variable
Median
Risk-neutral probabilities
10. The risk associated with accounting standards that vary from country to country or with any uncertainty about how certain transac-tions should be recorded.
Split-off
Estimator
Accounting risk
Futures contract
11. 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.
Exchange for physicals (EFP)
North
Degree of confidence
Horizontal common-size analysis
12. A merger or acquisition in which target shareholders are to receive shares of the acquirer's common stock as compensation.
Securities offering
Trust receipt arrangement
Interest rate parity
Warehouse receipt arrangement
13. A type of finance lease - from a lessor perspective - where the present value of the lease payments (lease receivable) exceeds the carrying value of the leased asset. The revenues earned by the lessor are operating (the profit on the sale) and financ
Sales-type lease
Provision
Normalized
Monitoring costs
14. Quantiles that divide a distribution into five equal parts.
Growth investors
Discrete time
Quintiles
Lockbox system
15. The process of using an option to buy or sell the underlying.
Random number generator
Economic exposure
Exercise or exercising the option
Empirical probability
16. A widely used approach to estimate an overall capitalization rate. It is based on the premise that debt and equity financ-ing is typically involved in a real estate transaction.
Model specification
Band-of-investment method
Sinking fund factor
Government sector surplus or deficit
17. A test in which the null hypothesis is rejected in favor of the alternative hypothesis if the evidence indicates that the population param-eter is either smaller or larger than a hypothe-sized value.
Perfect collinearity
Direct format (direct method)
Normalized earnings per share (or normal earnings per share)
Two-sided hypothesis test (or two-tailed hypothesis test)
18. A merger involving companies at different positions of the same production chain; for example - a supplier or a distributor.
Target semivariance
Available-for-sale investments
Vertical merger
Payables turnover
19. A prof -itabili ty ratio calculated as operating income (i.e. - income before inte est and taxes) divided by revenue.
Ope ating profit margin (operating margin)
Qualifying special purpose entities
Government sector surplus or deficit
Fixed costs
20. A merger or acquisition that is to be paid for with cash - securities - or some combina-tion of the two.
Mesokurtic
Arrears swap
Momentum indicators
Mixed offering
21. The relationship amongputs - calls - and forward contracts.
Vesting date
Finance lease (capital lease)
Pet projects
Put-call-forward parity
22. A variation of a straddle in which the put and call have different exercise prices.
Long-term contract
Strangle
Stock options (stock option grants)
Time-weighted rate of return
23. A random variable for which the range of possible outcomes is the real line (all real numbers between (-00 and +(0) or some subset of the real line.
Investment opportunity schedule
Continuous random variable
One-sided hypothesis test (or one-tailed hypothesis test)
Interest rate option
24. A valuation ratio calculated as price per share divided by cash flow per share.
NTM P/E
Financing activities
Price to cash flow
Imports
25. A contract in which one party has the right to claim a payment from another party in the event that a specific credit event occurs over the life of the contract.
Credit derivatives
Pure-play method
Horizontal common-size analysis
Minimum-variance frontier
26. An acquisition in which the acquirer purchases the target company's assets and pay-ment is made directly to the target company.
Risk governance
Capital market line (CML)
Asset purchase
Probability distribution
27. A variation of VAR that reflects the risk of a company's earnings instead of its market value.
Earnings at risk (EAR)
Underlying
Safety stock
Abandonment option
28. Limits imposed by a futures exchange on the price change that can occur from one day to the next.
Settlement risk
Reconciliation
Price limits
Performance guarantee
29. A swap in which the underlying is an interest rate. Can be viewed as a currency swap in which both currencies are the same and can be created as a combination of currency swaps.
Double-entry accounting
Trade credit
Interest rate swap
Null hypothesis
30. An option strategy involving the purchase of a put and sale of a call in which the holder of an asset gains protection below a certain level - the exercise price of the put - and pays for it by giving up gains above a certain level - the exercise pri
Corporate governance
Proportionate consolidation
Pooling of interests accounting method
Collar
31. A business owned and operated by more than one individual.
Definitive merger agreement
Trading securities (held-for-trading securities)
Partnership
Kurtosis
32. An option strategy that involves buying a call with a lower exercise price and selling a call with a higher exercise price. It can also be exe-cuted with puts.
Efficiency
Defined-benefit pension plans
Shark repellents
Bull spread
33. Any outcome or specified set of outcomes of a random variable.
Principal
Event
Debt-to-capital ratio
First-order serial correlation
34. 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.
PEG ratio
Adjusted present value (APV)
Held-for-trading securities (trading securities)
No-growth company
35. 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.
Investment constraints
Straddle
Offsetting
Merger
36. The differential of infor-mation between corporate insiders and outsiders regarding the company's performance and prospects. Managers typically have more informa-tion about the company's performance and prospects than owners and creditors.
Put-call-forward parity
Simple interest
Histogram
synunetric information
37. The difference between current assets and current liabilities.
Bond yield plus risk premium approach
Monitoring costs
Income tax recoverable
Working capital
38. The evaluation of risk-adjusted performance; the evaluation of invest-ment skill.
Performance appraisal
Equitizing cash
Conditional probability
Mean-variance analysis
39. The proportion of a company's assets that is financed with long-term debt.
Payout ratio
Equity forward
Long-term debt-ta-assets ratio
Takeover premium
40. Each value on a binomial tree from which suc-cessive moves or outcomes branch.
Locked limit
Sample variance
Node
Inventory
41. A country that is lending more to the rest of the world than it is borrowing from it.
Liquidity discount
NTM P/E
Out-of-sample test
Net lender
42. The concept that dividends paid now displace earnings in all future periods.
Efficient portfolio
Geometric mean
Dividend displacement of earnings
Infant-industry argument
43. Expectations that differfrom consensus expectations.
Taxable temporary differences
Trade-weighted index
Differential expectations
Cash-flow-statement-based accruals ratio
44. A function that specifies the probability that the random variable takes on a specific value.
Defined-benefit pension plans
Probability function
Population standard deviation
Rejection point (or critical value)
45. Accounting in which some income items are reported as part of stockholders' equity rather than as gains and losses on the income statement; certain items of comprehensive income bypass the income statement and appear as direct adjustments to sharehol
Pairs arbitrage trade
Dirty surplus accounting
Credit
Theory of contestable markets
46. The distribution of all distinct possible values that a statistic can assume when computed from samples of the same size ran-domly drawn from the same population.
Direct debit program
Sinking fund factor
Abnormal earnings
Sampling distribution
47. The time remaining in the life of a derivative - typically expressed in years.
Time to expiration
Initial margin requirement
Nominal scale
Cointegrated
48. Segment liabilities divided by segment assets.
Segment debt ratio
Minority active investments
Floorlet
Abandonment option
49. The use of an inaccurate pricing model for a particular investment - or the improper use of the right model.
Box spread
Nondeliverable forwards (NDFs)
Model risk
Classified balance sheet
50. 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.
Creative response
Residual income method (or excess earnings method)
Rate-of-return regulation
Project sequencing