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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. All members of a specified group.
Pairs arbitrage
Population
Yield spread
LIFO layer liquidation (LIFO liquidation)
2. The amount of money that a trader deposits in a margin account. The term is derived from the stock market practice in which an investor bor-rows a portion of the money required to purchase a certain amount of stock. In futures markets - there is no b
External growth
White knight
Leading dividend yield
Margin
3. Linear regression involv-ing two or more independent variables.
Sales returns and allowances
Multiple linear regression
Historical method
Binomial random variable
4. Income approach that values an asset based on estimates of future cash flows discounted to present value by using a discount rate reflective of the risks associated wi th the cash flows.
Free cash flow method
Temporal method
Dilution
Protective put
5. A result indicating that the null hypothesis can be rejected; with reference to an estimated regression coefficient - frequently understood to mean a result indicating that the corresponding population regression coefficient is different from O.
Bonding costs
Statistically significant
Market-oriented investors
After-tax cash flow (ATCF)
6. A quantitative measure that specifies where data are centered.
Antidilutive
Measure of central tendency
No-growth company
Pure factor portfolio
7. An arrangement whereby a customer authorizes a debit to a demand account; typically used by companies to collect routine pay-ments for services.
Market risk premium
Fixed charge coverage
Geometric mean
Direct debit program
8. Describes two time series that have a long-term financial or economic relationship such that they do not diverge from each other without bound in the long run.
Specific identification method
Cointegrated
Liquidation
Annuity
9. The risk associated with the conversion of foreign financial statements into domestic currency.
Translation exposure
Holding period return
Alternative hypothesis
Legal risk
10. 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.
Dividend payout policy
Simple random sample
Marking to market
Free cash flow to equity model
11. Securities held by banks or other financial intermediaries for trading purposes.
Fair market value
Cost of goods sold
Credit risk or default risk
Dealing securities
12. CMT A hypothetical U.S. Treasury note with a constant maturity. A CMT exists for various years in the range of 2 to
Constant maturity treasury or
Analysis of variance (ANOVA)
Noncurrent assets
Underlying earnings (or persistent earnings - continu-ing earnings - or core earnings)
13. Quantiles that divide a distribution into 100 equal parts.
Sampling
Percentiles
Rational efficient markets formulation
Total probability rule
14. The annual return that an investor earns on a bond if the investor purchases the bond today and holds it until maturity.
Day trader
Accounts receivable turnover
Forward P/E (also leading P/E or prospective P/E)
Yield to maturity
15. An estimate of the average time that elapses between paying suppliers for materi-als and collecting cash from the subsequent sale of goods produced.
Bargain purchase
Liquidation value
Investment value
Net operating cycle
16. A decision rule for choos-ing between two investments based on their means and variances.
Markowitz decision rule
Homoskedasticity
Earnings management activity
Book value of equity (or book value)
17. Nonconvertible - noncallable preferred stock with a specified divi-dend rate that has a claim on earnings senior to the claim of common stock - and no maturity date.
Fixed-rate perpetual preferred stock
Equity dividend rate
Kurtosis
Other post-employment benefits
18. An approach to investing thatfocuses on the individual characteristics of securi-ties rather than on macroeconomic or overall market forecasts.
Bottom-up investing
Decision rule
Market price of risk
Unbilled revenue (accrued revenue)
19. Not due to be consumed - converted into cash - or settled within one year after the bal-ance sheet date.
Trust receipt arrangement
Dummy variable
Noncurrent
Diluted earnings per share (diluted
20. A spontaneous form of credit in which a purchaser of the goods or service is financing its purchase by delaying the date on which payment is made.
Capital rationing
Receivables turnover
Trade credit
Going-concern assumption
21. An Activity ratio calculated as total revenue divided by average net fixed assets.
Clean surplus relation
Fixed asset turnover
Internal rate of return (IRR)
Income tax paid
22. 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.
Historical exchange rates
Molodovsky effect
Net asset balance sheet exposure
Trimmed mean
23. Current market w ice divided by the most recent quarterly per-share dividend multiplied by four.
Agency relationships
Trailirig dividend yield
Floored swap
Floor traders or locals
24. The actual return on a debt security if it is held to maturity.
Net liability balance sheet exposure
Heteroskedastic
Yield
Equity dividend rate
25. The risk associated with the pos-sibility that a payment due at a later date will not be made.
Potential credit risk
If-converted method
Designated fair value instruments
Account format
26. The positive square root of the sample variance.
Equitizing cash
Accounting profit (income before taxes or pretax income)
Sample standard deviation
Debt covenants
27. Costs borne by management to assure owners that they are working in the own-ers' best interest (e.g. - implicit cost of non-compete agreements).
Debt ratings
Normal distribution
Present value model or discounted cash flow model
Bonding costs
28. A merger; the term may be applied to any transaction - but is often used in reference to hos-tile transactions.
Unbiasedness
Takeover
Offsetting
Pyramiding
29. A non-operating entity created to carry out a specified purpose - such as leasing assets or securitizing receivables; can be a corporation - partnership - trust - limited liability - or partnership formed to facilitate a specific type of business act
Special purpose entity (special purpose vehicle or variable interest entity)
Deep out of the money
Estimate
Net revenue
30. A set of techniques for estimating losses in extremely unfavorable combinations of events or scenarios.
Stress testing
Contribution margin
Floor
Matching principle
31. A widely used approach to estimate an overall capitalization rate. It is based on the premise that debt and equity financ-ing is typically involved in a real estate transaction.
Band-of-investment method
Minimum-variance portfolio
Rent seeking
Cash flow statement (statement of cash flows)
32. The property of having a non-constant variance; refers to an error term with the property that its variance differs across observations.
Agency costs of equity
Carrying amount (book value)
Heteroskedasticity
Futures commission merchants (FCMs)
33. An option strategy involving the purchase of two calls and one put.
Strap
Survey approach
Random variable
Leveraged buyout (LBO)
34. Options that - if exercised - would result in the value received being worth more than the payment required to exercise.
In-the-money
Solvency ratios
Macaulay duration
Unconditional probability (or marginal probability)
35. Each component call option in a cap.
Caplet
Drag on li
Antidilutive
Stratified random sampling
36. With eference to grouped data - a se t or val-ues within w ich an observation falls.
Interval
Takeover premium
Working capital turnover
Portfolio selection/composition problem
37. A complete pass through the steps of a simula tion .
Harmonic mean
Simulation trial
Account format
Earnings per share
38. Factors related to the company's internal performance - such as factors relating to earnings growth - earnings variability - earnings momentum - and financial leverage.
Company fundamental factors
Quota
Performance measurement
Just-in-time method
39. Under U.S. GAAP - a measure used in estimating a defined-benefit pen-sion plan's liabilities - defined as 'the actuarial present value of benefits (whether vested or non-vested) attributed by the pension benefit formula to employee service rendered b
Clientele effect
Relative strength (RSTR) indicators
Accumulated benefit obligation
Ratio scales
40. A bond in which the amount received for delivering the bond is largest com-pared with the amount paid in the market for the bond.
Residual claim
Purchased in-process research and development costs
Reviewed fmancial statements
Cheapest to deliver
41. A company's chosen propor-tions of debt and equity.
Historical method
Incremental cash flow
Multi-step format
Target capital structure
42. A third party that is sought out by the target company's board to purchase the target in lieu of a hostile bidde .
White knight
Accumulated depreciation
Top-down analysis
Chart of accounts
43. The seller of a derivative contract. Also refers to the position of being short a derivative.
Hypothesis
Put-call parity
Short
Histogram
44. With reference to a transaction or a security - one that would increase earnings per share (EPS) or result in EPS higher than the com-pany's basic EPS-antidilutive securities are not included in the calculation of diluted EPS.
Antidilutive
Acquisition method
Specific identification method
Floor traders or locals
45. 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
Collar
Held-to-maturity investments
Tax risk
Single-step format
46. An extra return that compen-sates investors for the risk of loss relative to an investment's fair value if the investment needs to be converted to cash quickly.
Time-series data
Holding period return
Backtesting
Liquidity premium
47. The standard deviation of the differ-ences between a portfolio's returns and its bench-mark's returns; a synonym of active risk.
Conversion factor
Monitoring costs
Total asset turnover
Tracking risk
48. Quantiles that divide a distribution into 10 equal parts.
Exercise price (strike price - striking price - or strike)
Deciles
Absolute valuation model
Growth option or expansion option
49. An act passed by the U.S. Con-gress in 2002 that created the Public Company Accounting Oversight Board (PCAOB) to oversee auditors.
Nonparametric test
Economic profit
After-tax cash flow (ATCF)
Sarbanes-Oxley Act
50. The relationship between option price and volatility.
Working capital
Incremental cash flow
Quartiles
Vega