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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. Analysis that shows the range of possible outcomes as specific assumptions are changed.
Free cash flow method
Current cost
Dynamic hedging
Sensitivity analysis
2. A swap in which each party makes ayments to the other in different currenmes.
Warehouse receipt arrangement
Interest coverage
Mean excess return
Currency swap
3. A corporate transac-tion in which management repurchases all out-standing common stock - usually using the proceeds of debt issuance.
Management buyout (MBO)
Treasury shares
Enterprise value multiple
Method of comparables
4. Historical beta adjusted to reflect the tendency of beta to be mean reverting.
Vested benefit obligation
Adjusted beta
Portfolio possibilities curve
Cash
5. The risk that a financial instrument cannot be purchased or sold without a significant concession in price due to the size of the market.
Exhaustive
Liquidity risk
Overnight index swap (OIS)
Reverse stock split
6. 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).
Multiple
Down transition probability
Expected value
Binomial tree
7. A limit move in the futures market in which the price at which a transaction would be made is at or above the upper limit.
Strategic transaction
Continuously compounded return
Guideline public companies
Liruit up
8. The first date that a share trades without (i.e. - 'ex') the dividend.
Entry price
Ex-dividend date
Equity swap
Floating-rate loan
9. Observations on characteristic(s) of the same observational unit through time.
Residual income (or economic profit or abnormal earnings)
Logit model
Longitudinal data
Coefficient of variation (CV)
10. A measure of sensitivity; the incremental change in one variable with respect to an incre-mental change in another variable.
Cash flow at risk (CFAR)
Elasticity
Market risk
Short
11. The amount at which an asset or liability is valued for tax purposes.
Linear trend
Event
Asset-based valuation
Tax base (tax basis)
12. Observations that are depen-dent on each other.
Balance of payments accounts
Paired observations
Break point
Income
13. Generally - a synonym for revenue; 'sales' is generally understood to refer to the sale of goods - whereas 'revenue' is understood to include the sale of goods or services.
Sales
Payoff
Diffuse prior
Covariance
14. The most frequently occurring value in a set of observations.
Net operating assets
Mode
Multivariate distribution
Debt ratings
15. The feature of a futures contract giv-ing the short the right to make decisions about what - when - and where to deliver.
Arbitrage portfolio
Terminal price multiple
Deliveryoption
Independent and identically distributed (l
16. Transactions that are denominated in a currency other than a com-pany's functional currency.
Split-off
Foreign currency transactions
Residual income (or economic profit or abnormal earnings)
Benchmark value of the multiple
17. The cash flow available to a company's common shareholders after all operat-ing expenses - interest - and principal payments have been made - and necessary investments in working and fixed capital have been made.
Differentiation
Free cash flow to equity
Illiquidity discount
Target payout ratio
18. A strategy in which a position is hedged by making frequent adjustments to the quantity of the instrument used for hedging in relation to the instrument being hedged.
Basis point value (BPV)
Dynamic hedging
Terms of trade
Independent projects
19. A measure of the sensitivity of a bond's yield to a general measure of bond yields in the market that is used to refine the hedge ratio.
Operations risk or operational risk
Yield beta
Block
If-converted method
20. Accounting that satisfies the condition that all changes in the book value of equity other than transactions with owners are reflected in income. The bottom-line income reflects all changes in shareholders' equity arising from other than owner transa
Random walk
Simulation trial
Clean surplus accounting
Net lender
21. The positive square root of the sample variance.
Sample standard deviation
Ex-dividend date
Absolute valuation model
Exchange ratio
22. The minimum rate of return required by an investor to invest in an asset - given the asset's riskiness.
Required rate of return
Heteroskedasticity
Mean-variance analysis
Bank discount basis
23. A country that during its entire his-tory has borrowed more in the rest of the world than other countries have lent in it.
Linear trend
Debt-to-capital ratio
Debtor nation
Market approach
24. In probability - with reference to an event 5 - the event that 5 does not occur; in eco-nomics - a good that is used in conjunction with another good.
Complement
Stock-out losses
Point of sale
Exchange rate
25. An option strategy involving the purchase of two puts and one call.
Add-on interest
Agency costs
Compiled f'mancial statements
Strip
26. With reference to the presenta-tion of expenses in an income statement - the grouping together of expenses by similar nature - e.g. - all depreciation expenses.
Grouping by nature
Heteroskedasticity
Tracking risk
Declaration date
27. The differences between actual and predicted value of time series outside the sample period used to fit the model.
Centralization permits economies of scale and allows a company to use some of its risks to offset other risks.
Scenario analysis
LIFO method
Out-of-sample forecast errors
28. A swap in which the notional principal changes according to a for-mula related to changes in the underlying.
Cash price or spot price
Amortizing and accreting swaps
Goodwill
Share repurchase
29. A method for accounting for the effect of options (and warrants) on earnings per share (EPS) that specifies what EPS would have been if the options and warrants had been exercised and the company had used the pro-ceeds to repurchase common stock.
Offsetting
Treasury stock method
Default risk premium
Real options
30. Projects in which influential managers want the corporation to invest. Often - unfortu-nately - pet projects are selected without undergo-ing normal capital budgeting analysis.
Day trader
Synthetic put
Pet projects
Maturity premium
31. Assets that are expected to be consumed or converted into cash in the near future - typically one year or less.
Current assets - or liquid assets
London Interbank Offer Rate (LIBOR)
If-converted method
Tangible assets
32. R The correlation between the actual and forecasted values of the dependent variable in a regression.
Multiple
Annual percentage rate
Active risk
Prior probabilities
33. An Activity ratio calculated as total revenue divided by average net fixed assets.
Fixed asset turnover
Population standard deviation
Return on total capital
Market-extraction method
34. A stage of growth in which a company typically enjoys rapidly expanding markets - high profit margins - and an abnormally high growth rate in earnings per share.
Credit spread option
Put-call-forward parity
Growth phase
Active strategy
35. The evaluation of risk-adjusted performance; the evaluation of invest-ment skill.
Principal
Bear spread
Bottom-up analysis
Performance appraisal
36. The difference between reported earnings per share and expected earnings per share.
Analysis of variance (ANOVA)
Random number generator
Unexpected earnings (also earnings surprise)
Settlement risk
37. Revenue after adjustments (e.g. - for estimated returns or for amounts unlikely to be collected).
Settlement date or payment date
Net revenue
Leverage
Implied yield
38. The single-period interest rate for a completely risk-free security if no infla-tion were expected.
Identifiable intangible
Spread
Conversion factor
Real risk-free interest rate
39. The risk associated with accounting standards that vary from country to country or with any uncertainty about how certain transac-tions should be recorded.
Price limits
Accounting risk
Provision
Corporate raider
40. A form of restructuring in which sharehold-ers of the parent company are given shares in a /Jewl y c eated entity in e~change for their shares of the pare ~ company.
Probability function
Split-off
Free cash flow hypothesis
Present value (PV)
41. A merger involving compa-nies that are in unrelated businesses.
Qualitative dependent variables
Discount for lack of marketability
Conglomerate merger
Forward rate agreement (FRA)
42. A transaction executed inthe foreign exchange market in which a currencyis purchased (sold) and a forward contract is sold(purchased) to lock in the exchange rate forfuture delivery of the currency. This transactionshould earn the risk-free rate of t
Bottom-up analysis
Exercise price (strike price - striking price - or strike)
Marketability discount
Covered interest arbitrage
43. A cost that has already been incurred.
Sunk cost
Bottom-up analysis
Fair value
Dividend payout policy
44. The relationship between option price and volatility.
Vega
Liruit up
Sustainable growth rate
Earnings yield
45. In the context of customer receipts - the amount of money that is in transit between pay-ments made by customers and the funds that are usable by the company.
Float
Bond equivalent yield
Risk governance
Credit analysis
46. A formula that expresses the equivalence or parity of spot and forward rates - after adjusting for differences in the interest rates.
Spreadsheet modeling
Interest rate parity
Multivariate distribution
Broker
47. A transaction whereby the target company management team converts the target to a privately held company by using heavy borrowing to finance the purchase of the target company's outstanding shares.
Economic sectors
Leveraged buyout (LBO)
Liruit move
Return on total capital
48. The market value of a swap.
Multivariate distribution
Replacement value
Robust standard errors
Random number
49. A function giving the probability that a random variable is less than or equal to a specified value.
Cumulative distribution function
Estimator
Purchased in-process research and development costs
Leveraged recapitalization
50. A procedure used primarily in futures markets in which the parties to a contract settle the amount owed daily. Also known as the daily settlement.
Capitalized inventory costs
Marking to market
Currency option
Investment value