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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. A multifactor model in which the factors are attributes of stocks or com-panies that are important in explaining cross-sectional differences in stock prices.
Proxy fight
Financial leverage
Salvage value
Fundamental factor models
2. Estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.
Leveraged buyout (LBO)
Nominal rate
Net realizable value
Deciles
3. An electronic payment network available to businesses - individuals - and financial institutions in the United States - U.S. -Territories - and Canada.
Automated Clearing House
Bottom-up investing
Net liability balance sheet exposure
Money-weighted rate of return
4. R The correlation between the actual and forecasted values of the dependent variable in a regression.
Asset-based approach
Presentation currency
Multiple
Split-off
5. Any departure of the market price of an asset from the asset's estimated intrinsic value.
Gains
Mispricing
omparable company
Commodity futures
6. A perpetual annuity - or a set of never-ending level sequential cash flows - with the first cash flow occurring one period from now.
Cyclical businesses
Perpetuity
Capped swap
Component cost of capital
7. The condition in a financial mar-ket in which two equivalent financial instruments or combinations of financial instruments can sell for only one price. Equivalent to the principle that no arbitrage opportunities are possible.
Law of one price
Active portfolio
Linear regression
Other comprehensive income
8. The after-tax net operating profits as a percent of total assets or capital.
Return on invested capital (ROIC)
Operating risk
Box spread
Direct f'mancing lease
9. The margin requirement on any day other than the first day of a transaction.
Maintenance margin requirement
Strategic transaction
Proxy fight
No-growth value per share
10. An annuity with a first cash flow that is paid one period from the present.
Ordinary annuity
Current exchange rate
Temporal method
Prior probabilities
11. An active investment strategy whereby the timing of cash outflows is not matched with investment maturities.
Revaluation
Minority active investments
Mismatching strategy
Trailing P/E (or current PIE)
12. Managers who hold portfolios that differ from their benchmark port-folio in an attempt to produce positive risk-adjusted returns.
Pull on liquidity
Active investment managers
Lessor
Harmonic mean
13. A swaption that allows the holder to enter into a swap as the fixed-rate receiver and floating-rate payer.
New growth theory
Write-down
Cross-product netting
Receiver swaption
14. Making forecasts - estimates - or judgments about a larger group from a smaller group actually observed; using a sample statistic to infer the value of an unknown population parameter.
Statistical inference
Historical equity risk premium approach
Accrual basis
Skewness
15. The day that options are granted to employees; usually the date that compensation expense is measured if both the number of shares and option price are known.
Pecking order theory
Debt-to-capital ratio
Grant date
Operating leverage
16. A measure of correlation applied to ranked data.
Multicollinearity
Spearman rank correlation coefficient
Merger
Stated rate (nominal rate or coupon rate)
17. Sales price less disposition costs - amortized mortgage loan bal-ance - and capital gains taxes.
Measure of location
Value investors
After-tax equity reversion (ATER)
Two-sided hypothesis test (or two-tailed hypothesis test)
18. Probabilities that generally do not vary from person to person; includes a pri-ori and objective probabilities.
Active risk squared
Objective probabilities
Robust standard errors
Estimated (or fitted) parameters
19. A variable used to explain the dependen t variable in a regression ; a right-hand-side variable in a regression equation .
Independent variable
Present value of growth opportunities (or value of growth)
Decision rule
Probability distribution
20. A transformation that involves sub-tracting the mean and dividing the result by the standard deviation.
Pure-play method
No-growth value per share
Ratio scales
Standardizing
21. The value of an asset given a hypothetically complete understand-ing of the asset's investment characteristics; the value obtained if an option is exercised based on current conditions.
Rho
Cheapest to deliver
Intrinsic value or exercise value
Rate-of-return regulation
22. A measure of financial lever-age calculated as average total assets divided by average total equity.
LIFO method
Terminal value of the stock (or continuing value of the stock)
Power of a test
Financial leverage ratio
23. The ratio of gross profi t to revenues.
Gross profit argin
Tender offer
Sampling
Degrees of freedom (df)
24. A procedure used in certain deriva-tive transactions that specifies that the long and short parties engage in the equivalent cash value of a delivery transaction.
Government sector surplus or deficit
Scalper
Default risk premium
Cash settlement
25. With reference to statisti. cal inference - the subdivision dealing with estimating the value of a population parameter.
Up transition probability
Investment strategy
Solvency
Estimation
26. The time between settlement dates.
Quintiles
Unbiasedness
Grouping by function
Settlement period
27. A balance sheet asset that arises when an excess amount is paid for income taxes relative to accounting profit. The taxable income is higher than accounting profit and income tax payable exceeds tax expense. The company expects to recove r the differ
General Agreement on Tariffs and Trade
Derivatives dealers
Return on invested capital (ROIC)
Deferred tax assets
28. Options that relate to investment deci-sions such as the option to time the start of a proj-ect - the option to adjust its scale - or the option to abandon a project that has begun.
Income tax paid
Discount
Real options
Market efficiency
29. Costs of inven tories including costs of purchase - costs of conversion - other costs to bring the inventories to their present location and condition - and the allocated portion of) fixed production overhead costs.
Bear spread
Market efficiency
Capitalized inventory costs
Standard cost
30. A quantitative restriction on the import of a particular good - which specifies the maximum amount that can be imported in a given time period.
Quota
Monetary/nonmonetary method
Incremental cash flow
Historical exchange rates
31. The owners of a joint venture. Each is active in the management and shares control of the joint venture.
Mean absolute deviation
Impairment
Venturers
Comparables (comps - guideline assets - guideline com-panies)
32. Not due to be consumed - converted into cash - or settled within one year after the bal-ance sheet date.
Salvage value
Commodity option
Noncurrent
PEG
33. In the context of the Treynor-Black model - the portfolio formed by mixing analyzed stocks of perceived nonzero alpha values. This portfolio is ultimately mixed with the passive mar-ket index portfolio.
Active portfolio
Interest rate parity
Cash ratio
Precautionary stocks
34. Options on individual stocks; also known as stock options.
Equity options
Straddle
Matrix pricing
Multi-step format
35. 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.
Other post-employment benefits
Cost structure
Tangible book value per share
Liquidity ratios
36. In the context of corporate finance - leverage refers to the use of fixed costs within a company's cost structure. Fixed costs that are operating costs (such as depreciation or rent) create operating leverage. Fixed costs that are financial costs (su
Leverage
Common size statements
Net operating assets
No-growth value per share
37. The original time to maturity on a swap.
Power of a test
Chain rule of forecasting
Split-off
Tenor
38. An amount equal to net taxes minus government expenditure on goods and services.
Potential credit risk
Root mean square(l er ror (RMSE)
Government sector surplus or deficit
Economic order quantity-reorder point
39. A condition in the futures markets in which the benefits of holding an asset exceed the costs - leaving the futures price less than the spot price.
ackwardation
Diluted earnings per share (diluted
Systematic factors
Deferred tax assets
40. A decision rule for choos-ing between two investments based on their means and variances.
Horizontal merger
Factor sensitivity (also factor betas or factor loadings)
Indirect format (indirect method)
Markowitz decision rule
41. A merger in which the company being purchased becomes a subsidiary of the purchaser.
Debt with warrants
Terminal share price
Labor productivity
Subsidiary merger
42. PIE (or forward PIE or prospective PIE) A stock's current price divided by the next year's expected earnings.
Subsidiary merger
Leading
Cash flow additivity principle
Liquidity risk
43. With reference to statistical infer-ence - the subdivision dealing with the testing ofhypotheses about one or more populations.
Precautionary stocks
Dutch Book theorem
Hypothesis testing
Liquidity premium
44. The cost to a com pany of issu-ing preferred stock; the dividend yield that a com-pany must commit to pay preferred stockholders.
Cost of preferred stock
Flotation cost
Taxable temporary differences
Segment margin
45. The amount charged for the delivery of goods or services in the ordinary activities of a business over a stated period; the inflows of eco-nomic resources to a company over a stated period.
Direct format (direct method)
Deciles
Bottom-up investing
Revenue
46. An operating segment or one level below an operating segment (referred to as a component) .
Cost averaging
Prior transaction method
Index amortizing swap
Reporting unit
47. An estimate of the country spread (country equity premium) for a develop-ing nation that is based on a comparison of bonds yields in country being analyzed and a developed country. The sovereign yield spread is the differ-ence between a government bo
Sovereign yield spread
Dividends per share
Tie-in sales
Build-up method
48. A measure of an option-free bond's aver-age maturity. Specifically - the weighted average maturity of all future cash flows paid by a security - in which the weights are the present value of these cash flows as a fraction of the bond's price. A measu
Settlement price
Duration
Portfolio performance attribution
IRR rule
49. An option that gives the holder the right to sellan underlying asset to another party at a fixedprice over a specific period of time.
Put
Forward swap
Focus
Exp ected holding-period return
50. With reference to equity investors - investors who seek to invest in high-earnings-growth companies.
Cash flow at risk (CFAR)
Growth investors
Swap spread
Liquidity