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CFA Level2 Vocab

Subjects : certifications, cfa
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • 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. 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.






2. Computer-generated sensitivity or sce-nario analysis that is based on probability models fo r the factors that drive outcomes.






3. An option in which the underlying is a bond; primarily traded in over-the-counter markets.






4. Rules for portfolio selection that focus on the risk that portfolio value will fall below some minimum acceptable level over some time horizon.






5. The combination of the underlying - puts - calls - and risk-free bonds that replicates a forward contract.






6. A ratio of an ending price over a beginning price; it is equal to 1 plus the holding period return on the asset.






7. In the con-text of private company valuation - valuation model based on an assumption of a constant growth rate of free cash flow to the firm or a con-stant growth rate of free cash flow to equity.






8. The average exchange rate - with individual currencies weighted by their importance in U.S. international trade.






9. Assets used as benchmarks when applying the method of com parables to value an asset.






10. Ratio of sales on credit to the average balance in accounts receivable.






11. With reference to an interval of grouped data - the number of observations in the interval divided by the total number of observa-tions in the sample.






12. Items that affect comprehensive income but which bypass the income statement.






13. A balance sheet organized so as to group together the various assets and liabilities into subcategories (e.g. - current and noncurrent) .






14. An option strategy that involves buying a call with a lower exercise price and selling a call with a higher exercise price. It can also be exe-cuted with puts.






15. The annual percentage change in real CDP.






16. A possible value of a random variable.






17. The amount at which an asset or liability is valued for tax purposes.






18. A continuous - symmetric prob-ability distribution that is completely described by its mean and its variance.






19. The fixed price at which an option holder can buy or sell the underlying.






20. Netting the market values of all derivative contracts between two parties to deter-mine one overall value owed by one party to another in the event of bankruptcy.






21. A limit move in the futures market in which the price at which a transaction would be made is at or below the lower limit.






22. The problem or issue of popu-lation regression parameters that have changed over time.






23. 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.






24. The autocorrelation of the error term.






25. An agreement between two parties to exchange a series of future cash flows.






26. A mean computed after excluding a stated small percentage of the lowest and highest observations.






27. The study of how data can besummarized effectively.






28. The probability of correctly rejecting the null-that is - rejecting the null hypothesis when it is false.






29. The graph of the capital asset pricing model.






30. 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.






31. A person or country has a comparative advantage in an activi ty if that person or country can perform the activity at a lower opportunity cost than anyone else or any other country.






32. 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.






33. Public-company com-parables for the company being valued.






34. An option strategy involving the purchase of two calls and one put.






35. Analysts who work at brokerages.






36. The process by which options and other derivatives are priced by treating investors as though they were risk neutral.






37. An option on the yield spread on a bond.






38. Taken as a deduction in arriving at net income.






39. The average rate of return in excess of the risk-free rate.






40. The positive square root of the sample variance.






41. A quantity computed from or used to describe a sample.






42. Arrangements that do not result in additional liabilities on the balance sheet but nonetheless create economic obligations.






43. The P/E to-growth ratio - calculated as the stock's PI E divided by the expected earnings growth rate.






44. With respect to double-entry accounting - a debit records increases of asset and expense accounts or decreases in liability and owners' equity accounts.






45. A method of accounting in which combined companies were portrayed as if they had always operated as a single economic entity. Called pooling of interests under U.S. GAAP and uniting of interests under IFRS. (No longer allowed under U.S. GAAP or IFRS.






46. The characteristic of minimum-variance frontiers that they are sensitive to small changes in inputs.






47. 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.






48. Uncertainty with respect to the quantity of goods and services that a company is able to sell and the price it is able to achieve; the risk related to the uncertainty of revenues.






49. A test in which the null hypothesis is rejected only if the evidence indicates that the population parameter is greater than (smaller than) eo- The alternative hypothesis also has one side.






50. 1) A contract on an interest rate - whereby at periodic payment dates - the writer of the cap pays the difference between the market interest rate and a specified cap rate if - and only if - this differ-ence is positive. This is equivalent to a strea