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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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study here
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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. An approach to trading that uses pairs of closely re ated stocks - buying the relatively undervalued stock and selling short the relatively overvalued stock.
Deferred tax liabilities
Pairs trading
Income approach
Total probability rule for expected value
2. Promises by the company to pay benefits in the future - other than pension benefits - such as life insurance premiums and all or part of health care insurance for its retirees.
Fixed-income forward
U.S. interest rate differential
Other post-employment benefits
Off-balance sheet imancing
3. 1) The simultaneous purchase of an undervalued asset or portfolio and sale of an over-valued but equivalent asset or portfolio - in order to obtain a riskless profit on the price differential. Taking advantage of a market inefficiency in a risk-free
Valuation
Foreign exchange market
Semilogarithmic
Arbitrage
4. The investigation of issues relating to the accuracy of reported accounting results as reflections of economic per-formance; quality of earnings analysis is broadly understood to include not only earnings manage-ment - but also balance sheet manageme
Reorganization
Discount
Quality of earnings analysis
Expected value
5. A method of accounting for a business combination where the acquirer is required to measure each identifiable asset and liability at fair value. This method was the result ofa joint project of the IASB and FASB aiming at convergence in standards for
Conglomerate merger
PEG
Acquisition method
Transaction exposure
6. A European-style option with a value at maturity equal to the difference between the stock price at maturity and the average stock price during the life of the option - or $0 - whichever is greater.
Asian call option
Risk premium
Lack of marketability discount
Equity dividend rate
7. Instruments that payinterest as the difference between the amountborrowed and the amount paid back.
Autoregressive (AR) model
Pure discount instruments
Continuing residual income
Inventory turnover
8. The accuracy with which a company's reported financials reflect its operat-ing performance and their usefulness for forecast-ing future cash flows.
Direct f'mancing lease
Financial reporting quality
ackwardation
Investing activities
9. The expected return on equi-ties minus the risk-free rate; the premium that investors demand for investing in equities.
Aging schedule
Equity risk premium
Upstream
Stress testing
10. A model of stock val-uation that views a stock's intrinsic value as the present value of expected future free cash flows to equity.
Free cash flow to equity model
Exercise rate or strike rate
Delta
Settlement date or payment date
11. With reference to regression analysis - the estimated values of the population intercept and population slope coeffi-cien t(s) in a regression.
Tax expense
Mesokurtic
Collar
Estimated (or fitted) parameters
12. The risk associated with interest rates - exchange rates - and equity prices.
Double declining balance depreciation
Bond option
Ordinary annuity
Market risk
13. A number between - 1 and + 1 that measures the co-movement (linear association) between two random variables.
Winsorized mean
Band-of-investment method
Correlation
Cost averaging
14. Selling a product in slightly altered forms to different groups of consumers.
Fixed-income forward
Voluntary export restraint
Service period
Versioning
15. A form of data min-ing that applies information developed by previ-ous researchers using a dataset to guide curren t research using the same or a related dataset.
Intergenerational data mining
Cnsistent
Estimation
Currency swap
16. Probabilities that generally do not vary from person to person; includes a pri-ori and objective probabilities.
Negative serial correlation
Trade receivables (commercial receivables or accounts receivable)
Credit analysis
Objective probabilities
17. The amount at which an asset or liability is valued for tax purposes.
If-converted method
Tax base (tax basis)
Liruit up
Bootstrapping earnings
18. A variation of VAR that reflects the risk of a company's cash flow instead of its market value.
Asset-based loan
Cash flow at risk (CFAR)
Comprehensive income
Minority active investments
19. Any outcome or specified set of outcomes of a random variable.
Hurdle rate
Justified (fundamental)
Event
Payout ratio
20. Plan in which the company promises to pay a certain annual amount (defined benefit) to the employee after retirement. The company bears the investment risk of the plan assets .
Probability distribution
Defined-benefit pension plans
Foreign currency transactions
Notes payable
21. A trend in which the dependent vari-able changes at a constant rate with time.
Scaled earnings surprise
Interest rate option
Exercise price (strike price - striking price - or strike)
Linear trend
22. Projects in which influential managers want the corporation to invest. Often - unfortu-nately - pet projects are selected without undergo-ing normal capital budgeting analysis.
Financial flexibility
Modified duration
Pet projects
Control premium
23. A qualitative-dependent-variable multiple regression model based on the normal distribution.
Probit model
Market value of invested capital
Defined-contribution pension plans
Valuation allowance
24. A method of accounting in which combined companies were portrayed as if they had always operated as a single economic entity. Called pooling of interests under U.S. GAAP and uniting of interests under IFRS. (No longer allowed under U.S. GAAP or IFRS.
Pooling of interests accounting method
Report format
Solvency ratios
Financial leverage
25. Factor models that combine features of more than one type of factor model.
Interest rate
Conditional heteroskedasticity
Mixed factor models
Opportunity set
26. In accounting contexts - cash on hand (e.g. - petty cash and cash not yet deposited to the bank) and demand deposits held in banks and similar accounts that can be used in payment of obligations.
Effective annual yield (EAY)
Cost of carry model
Ratio spread
Cash
27. The rate of return required by suppliers of capital for an individual source of a company's funding - such as debt or equity.
Convertible debt
Inverse floater
Descriptive statistics
Component cost of capital
28. The average squared deviation below the mean.
Semivariance
Strategic transaction
Passive strategy
Transactions motive
29. An amount or percentage deducted from the value of an owner-ship interest to reflect the relative absence ofmarketability.
Implied repo rate
Securities Exchange Act of 1934
Bernoulli random variable
Discount for lack of marketability
30. A correlation that misleadingly points towards associations between variables.
Debt incurrence test
Spurious correlation
Rent seeking
Capital account
31. The day that the corporation issues a statement d eclaring a specific dividend.
Outcome
Declaration date
Economic order quantity-reorder point
Leveraged floating-rate note or leveraged floater
32. The analysis of portfolio performance in terms of the contribu-tions from various sources of risk.
Acquisition method
Currency option
Revolving credit agreements
Portfolio performance attribution
33. 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.
Unconditional probability (or marginal probability)
American
Purchasing power loss
Broker
34. 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.
FIFO method
Exchange ratio
Pure factor portfolio
Statutory merger
35. The probability of an event given (conditioned on) another event.
Conditional probability
Valuation ratios
Capture hypothesis
Underlying
36. Securities held by banks or other financial intermediaries for trading purposes.
Exercise or exercising the option
U.S. interest rate differential
Dealing securities
Diluted earnings per share (diluted
37. Momentum indicators based on price.
Discount for lack of control
Giro system
Technical indicators
White sqnire
38. The margin requirement on any day other than the first day of a transaction.
Maintenance margin requirement
Interest rate
Option
Leading dividend yield
39. An event or piece of information that causes the marketplace to re-evaluate the prospects of a company.
Method based on forecasted fundamentals
Fundamentals
Catalyst
Valuation allowance
40. A weighted average of the after-tax required rates of return on a company's common stock - preferred stock - and long-term debt - where the weights are the fraction of each source of financing in the company's target capital structure.
Weighted-average cost of capital (WACC)
Terminal price multiple
Market value of invested capital
Debt incurrence test
41. Bias that may result when failed or defunct companies are excluded from member-ship in a group.
Transaction exposure
Survivorship bias
Economic growth
Valuation ratios
42. Financial statements that are not accompanied by an auditor's opinion letter.
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43. 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
Information ratio (IR)
Operating activities
Book value of equity (or book value)
44. Carlo simulation method An approach to estimating a probability distribution of outcomes to examine what might happen if particular risks are faced. This method is widely used in the sci-ences as well as in business to study a variety of problems.
Capped swap
Nonmonetary assets and liabilities
Matrix pricing
Monte
45. To defer the decision to invest in a future projecn until the outcome of some or all of a current project is known. -Projects are sequenced through time - so that investing iN a project creates the option to invest in future projects.
Priced risk
Interest rate collar
Project sequencing
Swaption
46. With respect to double-entry accounting - a debit records increases of asset and expense accounts or decreases in liability and owners' equity accounts.
Stock options (stock option grants)
Debit
Stated annual interest rate or quoted interest rate
Arbitrage
47. Regulation that allowsprices to reflect only the actual average cost ofproduction and no monopoly profits.
Receivables turnover
Cost-of-service regulation
Time series
Prior probabilities
48. An updated probability that reflects or comes after new information.
Interest rate collar
Probability density function
Valuation
Posterior probability
49. Observations through time on a single characteristic of multiple observational units.
Cyclical businesses
Panel data
Held-to-maturity investments
Stated rate (nominal rate or coupon rate)
50. An entity (partnership - corporation - or other legal form) where control is shared by two or more entities called venturers.
Block
Joint venture
Cost of debt
Market timing