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CFA Level2 Vocab

Subjects : certifications, cfa
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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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. With reference to estimators - describes an estimator for which the probability of estimates close to the value of the population parameter increases as sample size increases.






2. Amount that must be set aside each period to have $1 at some future point in time.






3. The contribution to active risk squared resulting from the portfolio's different-than-benchmark exposures relative to factors specified in the risk model.






4. Segment liabilities divided by segment assets.






5. A profitability ratio calcu-lated as net income divided by average sharehold-ers' equity.






6. The hypothesis that higher debt levels discipline managers by forcing them to make fixed debt service payments and by reducing the company's free cash flow.






7. Segment profit (loss) divided by segment revenue.






8. Numbers produced by random number generators.






9. 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.






10. With reference to an interval of grouped data - the number of observations in the interval divided by the total number of observa-tions in the sample.






11. The sensitivity of the option price to the risk-free rate.






12. Potential future payments to the seller that are contingent on the achieve-ment of certain agreed on occurrences.






13. A measure of sensitivity; the incremental change in one variable with respect to an incre-mental change in another variable.






14. A measure of central tendency computed by taking the nth root of the product of n non-negative values.






15. Hirschman Index A measure of rna ket concentration that is calculated by summing the squared mar et shares for competing companies in an industry; high HHI readings or mergers that would result in large HHI increases are more likely to result in regu






16. A financial instrument that gives one party the right - but not the obligation - to buy or sell an underlying asset from or to another party at a fixed price over a specific period of time. Also referred to as contingent claims.






17. A purchase involving a buyer having essentially no material synergies with the target (e.g. - the purchase of a private company by a company in an unrelated industry or by a private equity firm would typically be a financial transaction) .






18. The expected total e b urn on an asset over a stated olding period; for stocks - the sum of tne expected dividend yield and the expected price appreciation over the holding period.






19. A pre-offer takeover defense mecha-nism that gives target company bondholders the right to sell their bonds back to the target at a pre-specified redemption price - typically at or above par value; this defense increases the need for cash and raises






20. A financial statement that reconciles beginning-of-period and end-of-period balance sheet values of cash; provides information about an entity's cash inflows and cash outflows as they pertain to oper-ating - investing - and financing activities.






21. The actual value of a variable minus its pre-dicted (or expected) value.






22. Segment profit (loss) divided by seg-ment assets.






23. The earnings growth rate in a company's mature phase; an earnings growth rate that can be sustained long term.






24. A multifactor model In which statistical methods are applied to a set of historical returns to determine portfolios that best explain either historical return covariances or vanances.






25. The tendency for the winner in cer-tain competitive bidding situations to overpay - whether because of overestimation of intrinsic value - emotion - or information asymmetries.

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26. A dividend yield based on the anticipated dividend during the next 12 months.






27. The extent to which a company can effect - through the use of debt - a propor-tional change in the re turn on common equity that is greater than a given proportional change in operating income; also - short for the financial leverage ratio.






28. P/E calculated on the basis of a forecast of EPS; a stock's current price divided by next year's expected earnings.






29. A variation of the monetary/ nonmonetary translation method that requires not only monetary assets and liabilities - but also nonmonetary assets and liabilities that are mea-sured at their current value on the balance sheet date to be translated at t






30. An event or piece of information that causes the marketplace to re-evaluate the prospects of a company.






31. The income tax expected to be recovered - from the taxing authority - on the basis of taxable income. It is a recovery of previ-ously remitted taxes or future taxes owed by the company.






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






33. A bias caused by using information that was not available on the test date.






34. A swap in which the floating payments have a lower limit.






35. The risk associated with the pos-sibility that a payment due at a later date will not be made.






36. With reference to statistical inference - astatement about one or more populations.






37. An intangible that can beacquired singly and is typically linked to specificrights or privileges having finite benefit periods(e.g. - a patent or trademark).






38. The risk that govern-mental laws and regulations directly or indirectly affecting a company's operations will change with potentially severe adverse effects on the com-pany's continued profitabiliny and even its long-term sustainability.






39. The discount possibly applied by the market to the stock of a company operating in multiple - unrelated businesses.






40. In reference to short-term cash man-agement - an investment strategy characterized by monitoring and attempting to capitalize on mar-ket conditions to optimize the risk and return relationship of short-term investments.






41. The margin requirementon the first day of a transaction as well as on anyday in which additional margin funds must be deposited.






42. A method of revenue recog-nition in which the seller does not report anyprofit until the cash amounts paid by the buyer-including principal and interest on any financingfrom the seller-are greater than all the seller'scosts for the merchandise sold.






43. A method of identifying the basic elements of the overall capitalization rate.






44. A variation of the market approach; establishes a value estimate based on the observed multiples from trading activity in the shares of public companies viewed as reasonably comparable to the subject private company.






45. Individual accounts to which an employee and typically the employer makes contributions - generally on a tax-advantaged basis. The amounts of contributions are defined at the outset - but the future value of the benefit is unknown. The employee bears






46. An arrangement whereby someone - an agent - acts on behalf of another per-son - the principal.






47. The residuals from a fitted time-series model within the sample period used to fit the model.






48. The observation that P /Es tend to be high on depressed EPS at the bottom of a business cycle - and tend to be low on unusually high EPS at the top of a business cycle.






49. 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






50. Assets used as benchmarks when applying the method of com parables to value an asset.