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Test your basic knowledge |
CFA Level2 Vocab
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Subjects
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
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. 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.
Synthetic put
Bottom-up investing
Portfolio possibilities curve
Cnsistent
2. The return on an asset in excess of the asset's required rate of return; the risk-adjusted return.
Direct f'mancing lease
Real GDP per person
Intergenerational data mining
Alpha (or abnormal return)
3. A transaction between two affiliates - an investor company and an associate company such that the associate company records a profit on its income statement. An example is a sale of inven-tory by the associate to the investor company.
Vega
asis swap
Upstream
Fair market value
4. The amount the company estimates that it can sell the asset for at the end of its useful life.
Initial public offering (IPO)
Cost of carry model
Active risk squared
Salvage value
5. The estimated gross amount of money that could be realized from the liquidation sale of an asset or assets - given a rea-sonable amount of time to find a purchaser or purchasers.
Probability density function
Cash o£ fering
Portfolio selection/composition problem
Orderly liquidation value
6. The loss in the value of an option resulting from movement of the option price toward its payoff value as the expiration day approaches.
Time value decay
Prior transaction method
Interest rate floor or floor
Semideviation
7. The price multiple for a stock assumed to hold at a stated future time.
Simulation trial
Terminal price multiple
Initial public offering (IPO)
Call
8. An inter-national agreement signed in 1947 to reduce tar-iffs on international trade.
General Agreement on Tariffs and Trade
Sales
Bond option
Leptokurtic
9. With respect to inventory accounting - the planned or target unit cost of inventory items or services.
Standard cost
Normal distribution
Skewness
Variable costs
10. The ratio of a set of observations' standard deviation to the observa-tions' mean value.
Nominal rate
Passive portfolio
Currency swap
Coefficient of variation (CV)
11. 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.
Credit-linked notes
Cost of goods sold
Law of one price
Venture capital investors
12. A procedure of selecting every kth member until reaching a sample of the desired size. The sample that results from this procedure should be approximately random.
Expected value
Systematic sampling
At the money
Risk governance
13. The combination of puts - the underly-ing - and risk-free bonds that replicates a call option.
Synthetic call
Mutually exclusive projects
Standard deviation
Interest rate cap or cap
14. A transaction in exchange-listed deriva-tive markets in which a party re-enters the market to close out a position.
Offsetting
Materiality
Operating profit (operating income)
Point estimate
15. The periodic investment of a fixed amount of money.
Bundling
Cost averaging
Total return swap
Flexible exchange rate
16. The risk that a company will suffer an extended diminution in market value relative to other companies in the same industry due to a demonstrated lack of concern for environmental - social - and governance risk factors.
Offsetting
Reputational risk
Nontariff barrier
Hurdle rate
17. A measure of correlation applied to ranked data.
Cost of preferred stock
Cash o£ fering
Exercise price (strike price - striking price - or strike)
Spearman rank correlation coefficient
18. A trade in two closely related stocks that involves buying the relatively undervalued stock and selling short the relatively overvalued stock.
Net realizable value
Pairs arbitrage
Valuation allowance
Data mining
19. Estimate of the aver-age number of days it takes to collect on credit accounts.
Leveraged floating-rate note or leveraged floater
Number of days of receivables
Regulatory risk
Law of one price
20. A model for pncmg futurescontracts in which the futures price is determinedby adding the cost of carry to the spot price.
One-sided hypothesis test (or one-tailed hypothesis test)
Mutually exclusive events
NTM P/E
Cost of carry model
21. A reduction in proportional ownership inter-est as a result of the issuance of new shares.
Ex-dividend
Method of comparables
Payer swaption
Dilution
22. A business's value under a going-concern assumption.
Derivative
Private sector surplus or deficit
Equilibrium
Going-concern value
23. An estimation formula; the formula used to compute the sample mean and other sample statistics are examples of estimators.
Forward price or forward rate
Sarbanes-Oxley Act
Block
Estimator
24. The portfolio that exploits an arbitrage opportunity.
Arbitrage portfolio
Equity dividend rate
Put-call parity
Forward swap
25. A merger involving the pur-chase of a target ahead of the acquirer in the value or production chain; for example - to acquire a supplier.
Weighted mean
Exposure to foreign exchange risk
Income tax payable
Backward integration
26. The positive square root of semivari-ance (sometimes called semistandard deviation) .
VISibility
Organic growth
Income tax recoverable
Semideviation
27. The rate demanded by purchasers of bonds - given the risks associated with future cash payment obligations of the particular bond issue.
Dumping
Market rate
Break point
Cost leadership
28. With reference to investment selection processes - an approach that starts with macro selection (i.e. - identifying attractive geo-graphic segments andVor industry segments) and then addresses selection 0 the most attractive investments within those
Top-down analysis
Market timing
Going-concern value
Stress testing
29. The value derived using a sum-of-the-parts valuation.
Long-lived assets (or long-term assets)
Breakup value or private market value
Income
Instability in the minimum-variance frontier
30. Aka Harmonic mean.
Agency costs
Arrears swap
Weighted harmonic mean
Equity risk premium
31. The contribution to active risk squared resulting from the portfolio's different-than-benchmark exposures relative to factors specified in the risk model.
Residual income method (or excess earnings method)
Enterprise risk management
Residual income (or economic profit or abnormal earnings)
Active factor risk
32. An active investment strategy that includes intentional matching of the timing of cash outflows with investment maturities.
Cost of carry
Matching strategy
Unconditional heteroskedasticity
Butterfly spread
33. 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.
Interest rate forward
Free cash flow to equity model
Guideline transactions method
Complement
34. The restatement of financial statement items using a common denominator or reference item that allows one to identify trends and major differences; an example is an income statement in which all items are expressed as a percent of revenue.
Paired observations
Statistic
Commodity futures
Common-size analysis
35. Valuation approach that values an asset based on pricing multiples from sales of assets viewed as similar to the subject asset.
Floating-rate loan
Market approach
Time-period bias
Debt-to-capital ratio
36. The minimum real wage rate needed to maintain life.
Frequency distribution
Interval
Subsistence real wage rate
Descriptive statistics
37. Futures contracts in which the underlying is a stock - bond - or currency.
Gross profit argin
Statement of changes in shareholders' equity (state-ment of owners' equity)
Fixed charge coverage
Financial futures
38. A theory of economic growth that proposes that real CDP per person grows because technological change induces a level of saving and investment that makes capital per hour oflabor grow.
Bond-equivalent yield
Neoclassical growth theory
Earnings game
Sample excess kurtosis
39. 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.
Total invested capital
Statistically significant
Agency relationships
Heteroskedasticity
40. A merger involving companies inthe same line of business - usually as competitors.
Horizontal merger
Inflation premium
Projected unit credit method
Sensitivity analysis
41. A value at or below which a stated fraction of the data lies.
Maintenance margin requirement
Return on equity (ROE)
Quantile (or fractile)
Locked limit
42. The ability to react and adapt to financial adversities and opportunities.
Quintiles
Financial flexibility
Portfolio implementation problem
Put-call-forward parity
43. 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 .
Defined-benefit pension plans
Divestiture
Book value of equity (or book value)
Beta
44. The difference between current assets and current liabilities.
Up transition probability
Working capital
Simulation trial
Accounts payable
45. An experiment that can produce one of two outcomes.
Bernoulli trial
Effective annual rate
Histogram
Static trade-off theory of capital structure
46. The business of acting as agents for buy-ers or sellers - usually in return for commissions.
Outcome
Capitalized inventory costs
Brokerage
Contingent consideration
47. Controlling additional property throughreinvestment - refinancing - and exchanging.
Finance lease (capital lease)
Pyramiding
Leveraged buyout (LBO)
Overall capitalization rate
48. The owners' remaining claim on the company's assets after the liabilities are deducted.
Settlement period
Deciles
Greenmail
Residual claim
49. Sales minus the cost of sales ~.e . - the cost of goods sold for a manufactur-ing cOlp pany) .
Sampling
Fundamental factor models
Gross profit (gross margin)
Free cash flow to equity model
50. An approach to decomposing return on investment - e.g. - return on equity - as the product of other financial ratios.
Sampling
Du Pont analysis
Debt-to-assets ratio
Double taxation