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Test your basic knowledge |
CFA Level2 Vocab
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Study First
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. The contri-bution to active risk squared resulting from the portfolio's active weights on individual assets as those weights interact with assets' residual risk.
Segment debt ratio
Unearned fees
Upstream
Active specific risk or asset selection risk
2. A synonym for robust standard errors.
Split-rate
White-corrected standard errors
Multi-step format
Clean surplus accounting
3. A ratio in property valua-tion; net operating income divided by sale price. Also known as the going-in rate.
Capitalized cash flow model (method)
Greenmail
Paired observations
Overall capitalization rate
4. A guarantee from the clear-inghouse that if one party makes money on a transaction - the clearinghouse ensures it will be paid.
Capital structure
Grouping by function
Performance guarantee
Segment turnover
5. The system of principles - policies - procedures - and clearly defined responsi-bilities and accountabilities used by stakeholders to overcome the conflicts of interest inherent in the corporate form.
Fundamentals
Corporate governance
Enterprise value multiple
Statistical inference
6. The positive square root of semivari-ance (sometimes called semistandard deviation) .
Earnings per share
Scalper
Semideviation
Stock options (stock option grants)
7. The rate demanded by purchasers of bonds - given the risks associated with future cash payment obligations of the particular bond issue.
P Value
Market rate
Static trade-off theory of capital structure
Variable costs
8. The net amount of cash provided from operating activities.
Segment ROA
Cash flow from operations (cash flow from operating activities or operating cash flow)
Value at risk (VAR)
Operating risk
9. An investment decision rule that accepts projects or investments for which the IRR is greater than the opportunity cost of capital.
Dutch Book theorem
Real exchange rate
Salvage value
IRR rule
10. The positive square root of the variance; a measure of dispersion in the same units as the original data.
Spreadsheet modeling
Normalized
Standard deviation
Tax loss carry forward
11. Factors that affect the average returns of a large number of different assets.
Systematic factors
Negative serial correlation
Linear association
Gross income multiplier (GIM)
12. Generally - a synonym for revenue; 'sales' is generally understood to refer to the sale of goods - whereas 'revenue' is understood to include the sale of goods or services.
Exchange rate
Sales
Cost-of-service regulation
Pretax margin
13. The costs of holding an asset - generally a function of the physical char-acteristics of the underlying asset.
No-growth value per share
Storage costs or carrying costs
Cost averaging
Unit root
14. A financial statement that reconciles the beginning-of-period and end-of-period balance sheet values of shareholders' equity; provides information about all factors affecting shareholders' equity.
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15. 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.
Target capital structure
Statement of retained earnings
Dividend discount model based approach
Real options
16. An attempt to acquire a com-pany against the wishes of the target's managers.
Linear association
Trend
Dependent
Hostile transaction
17. The probability-weighted average of the possible outcomes ofa random variable.
Pairs arbitrage
Forward rate agreement (FRA)
Statistical factor models
Expected value
18. Individuals or companies b hat execute fu tures transactions for other parties off the exchange.
Economic exposure
Futures commission merchants (FCMs)
Earnings game
Debt ratings
19. An arrangement whereby someone - an agent - acts on behalf of another per-son - the principal.
Agency relationships
Combination
Ex-dividend date
Swap spread
20. An inventory accounting method that averages the total cost of available inventory items over the total units avail-able for sale.
Trading securities (held-for-trading securities)
Log-log regression model
Weighted average cost method
Mode
21. A method of account-ing for joint ventures where the venturer's share of the assets - liabilities - income and expenses of the joint venture are combined on a line-by-line basis with similar items on the venturer's financial statements.
Electronic funds transfer
Official settlements account
Proportionate consolidation
Annual percentage rate
22. A fUl !lction giving the probability of joint occurrences of values of stated random variables.
Earnings expectation management
Hedge ratio
Delta-normal method
J oint probability function
23. Revenue after adjustments (e.g. - for estimated returns or for amounts unlikely to be collected).
Panel data
Financial flexibility
Scatter plot
Net revenue
24. The theory that managers take into account how their actions might be inter-preted by outsiders and thus order their prefer-ences for various forms of corporate financing. Forms of financing that are least visible to out-siders (e.g. - internally gen
Yield spread
Pecking order theory
Discount for lack of control
Value investors
25. Valuation indicators that relate either price or a fundamental (such as earnings) to the time series of their own past val-ues (or in some cases to their expected value).
Historical exchange rates
Opportunity set
Momentum indicators
Degrees of freedom (df)
26. A payment system in which cus-tomer payments are mailed to a post office box and the banking institution retrieves and deposits these payments several times a day - enabling the company to hav use of the fund sooner than in a centralized system in wh
Market rate
Reorganization
Lockbox system
Currency forward
27. The required rate of return on com-mon stock.
Flotation cost
Cost of equity
Robust standard errors
Legal risk
28. A series of call options on an interest rate - with each option expiring at the date on which the floating loan rate will be reset - and with each option having the same exercise rate. A cap in general can have an underlying other than an interest ra
Guideline transactions method
Pooling of interests accounting method
Project sequencing
Interest rate cap or cap
29. The use of an inaccurate pricing model for a particular investment - or the improper use of the right model.
Hedge ratio
Model risk
Commercial paper
Mature growth rate
30. A type of finance lease - from a lessor perspective - where the present value of the lease payments (lease receivable) equals the carry-ing value of the leased asset. The revenues earned by the lessor are financing in nature.
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31. A capital rationing environment assumes that the company has a fixed amount of funds to invest.
Covariance stationary
Hedge ratio
Capital rationing
Free cash flow to the
32. A variation of the market approach; considers actual transactions in the stock of the subject private company.
Debtor nation
Market-oriented investors
Prior transaction method
Present value of growth opportunities (or value of growth)
33. The expected value (the probability-weighted average) of squared deviations from a random variable's expected value.
Annuity
Mean
Blockage factor
Variance
34. Items that affect comprehensive income but which bypass the income statement.
Agency costs
Rule of 70
Dirty surplus items
Safety stock
35. An arrangement whereby a customer authorizes a debit to a demand account; typically used by companies to collect routine pay-ments for services.
Declaration date
Liquidity premium
Bonding costs
Direct debit program
36. The average squared deviation below the mean.
Conglomerate discount
Semivariance
Revolving credit agreements
Provision
37. A rate of return that reflects the rela-tionship between differently dated cash flows; a discount rate.
External growth
Ex-dividend
Interest rate
Protective put
38. A swap in which the floating payments have a lower limit.
Price to cash flow
Assets
Floored swap
Cost recovery method
39. A variation of a floating-rate note that has some type of unusual characteristic such as a leverage factor or in which the rate moves opposite to interest rates.
Income tax paid
Cherry-picking
Structured note
Covered call
40. A type of qualitative variable that takes on a value of 1 if a particular condition is true and 0 if that condition is false.
Dummy variable
Effective annual rate
Descriptive statistics
Acquisition method
41. In using the method of com parables - the value of a price mul-tiple for the comparison asset; when we have com-parison assets (a group) - the mean or median value of the multiple for the group of assets.
Sales-type lease
Split-off
Floating-rate loan
Benchmark value of the multiple
42. 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.
Event
Type I error
Impairment
Historical method
43. Describes a distribution that is less peaked than the normal distribution.
Securities Act of 1933
Net revenue
Settlement period
Platykurtic
44. The amount at which an asset or liability is valued for tax purposes.
Descriptive statistics
Outcome
Purchasing power gain
Tax base (tax basis)
45. The analyst'S estimate of a stock's value at a particular point in the future .
Terminal value of the stock (or continuing value of the stock)
Backtesting
Vega
Conversion factor
46. 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
Bottom-up analysis
Income tax payable
Share-the-gains - share-the-pains theory
White-corrected standard errors
47. The sum of all values in a distribution or dataset - divided by the number of values summed; a synonym of arithmetic mean.
Cheapest to deliver
Shortfall risk
Binomial model
Mean
48. A variation of a straddle in which the put and call have different exercise prices.
Deep in the money
Deep out of the money
Strangle
Projected unit credit method
49. With reference to the cash flow statement - a format for the presentation of the statement in which cash flow from operat-ing activities is shown as operating cash receipts less operating cash disburseme ts.
Credit
Direct format (direct method)
Simulation trial
PEG
50. The application of a set of criteria to reduce a set of potential investments to a smaller set having certain desired characteristics.
Screening
Mean excess return
Forward price or forward rate
Subjective probability