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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. Assets that can be most readily con-verted to cash (e.g. - cash - short-term marketable investments - receivables) .






2. The number of indepen-dent observations used.






3. The proportion of a company's assets that is financed with long-term debt.






4. The principle that the approximate num-ber of years necessary for an investment to double is 72 divided by the stated interest rate.






5. A type of swap transaction used as a credit derivative in which one party makes peri-odic payments to the other and receives the prom-ise of a payoff if a third party defaults.






6. The goods and sernces that we buy from people in other countries.






7. Fees charged to companies b)' invest-menJ ~nkers and other costs assooiated witli: rai'.. ing new capital.






8. The value that investors forgo by choosing a particular course of action; the value of something in its best alternative use.






9. The naturalloga-rithm of 1 plus the holding period return - or equivalently - the natural logarithm of the ending price over the beginning price.






10. Trading ex-dividend refers to shares that no longer carry the right to the next dividend payment.






11. A poison pill takeover defense that dilutes an acquirer's ownership in a target by giv-ing other existing target company shareholders the right to buy additional target company shares at a discount.






12. Sales minus the cost of sales ~.e . - the cost of goods sold for a manufactur-ing cOlp pany) .






13. The date of the final paymen on a swap' also - the swap's e piration date.






14. A business's value under a going-concern assumption.






15. 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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16. The percentage of total earnings paid out in dividends in any given year (in per-share terms - DPS/ EPS).






17. 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 .






18. A poison pill takeover defense that gives target company shareholders the right to purchase shares of the acquirer at a significant discount to the market price - which has the effect of causing dilution to all existing acquiring com-pany shareholder






19. A theory of economic growth based on the view that the growth of real GDP per person is temporary and that when it rises above subsistence level - a population explo-sion eventually brings it back to subsistence level.






20. A measurement scale that has all the characteristics of interval measurement scales as well as a true zero point as the origin.






21. A theory of economic growth based on the idea that real CDP per person grows because of the choices that people make in the pursuit of profit and that growth can persist indefinitely.






22. Orders to buy or sell that are too large for the liquidity ordinarily available in dealer networks or stock exchanges.






23. An estimate of the cost of common equity that is produced by summing the before-tax cost of debt and a risk premium that captures the additional yield on a company's stock relative to its bonds. The addi-tional yield is often estimated using historic






24. Interest earned but not yet paid.






25. Costs of research and development in progress atan acquired company; often - part of the purchaseprice of an acquired company is allocated to suchcosts.






26. Rate of return that dis-counts future cash flows from an investment to the exact amount of the investment; the discount rate that makes the present value of an invest-ment's costs (outflows) equal to the present value of the investment's benefits (in






27. 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.






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






29. Probabilities that generally do not vary from person to person; includes a pri-ori and objective probabilities.






30. Individuals or companies b hat execute fu tures transactions for other parties off the exchange.






31. The sum of the real risk-free interest rate and the inflation premium.






32. An offset to accounts receivable for the amount of accounts receivable that are estimated to be uncollectible.






33. With respect to the application of the LIFO inventory method - the liquidation of old - relatively low-priced inventory; happens when the volume of sales rises above the volume of recent purchases so that some sales are made from relatively old - low






34. Profits lost from not having suffi-cient inventory on hand to satisfy demand.






35. A liquidi ty ratio calculated as (cash + short-term marketable investments) divided by current liabilities; measures a company's ability to meet its current obligations with just the cash and cash equivalents on hand.






36. The cost of debt financing to a com-pany - such as when it issues a bond or takes out abank loan.






37. Offering two or more products for sale as a set.






38. The risk of a change in value between the transaction date and the settlement date of an asset or liability denominated in a for-eign currency.






39. A method of estimating VAR that uses data from the returns of the portfolio over a recent past period and compiles this data in the form of a histogram.






40. Temporary differ-ences that result in a taxable amount in a future period when determining the taxable profit as the balance sheet item is recovered or settled. t-Distribution A symmetrical distribution defined by a single parameter - degrees of free






41. A forecasting process in which the next period's value as predicted by the forecasting equation is substituted into the right-hand side of the equation to give a predicted value two periods ahead.






42. A method for estimating the betafor a company or project; it requires using a com-parable company's beta and adjusting it for finan-cialleverage differences.






43. The combination of calls - the underly-ing - and risk-free bonds that replicates a put option.






44. Aka also enterprise risk management.






45. An activity ratio equal to rev-enue divided by average receivables.






46. The difference between the fixed rate on an interest rate swap and the rate on a Trea-sury note with equivalent maturity; it reflects the general level of credit risk in the market.






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






48. Market makers that buy and sell by quoting a bid and an ask price. They are the primary providers ofliquidity to the market.






49. 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.






50. 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







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