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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. With reference to grouped data - the most frequently occurring interval.
Down transition probability
Modal interval
Fixed exchange rate
Cross-sectional data
2. An estimate of the country spread (country equity premium) for a develop-ing nation that is based on a comparison of bonds yields in country being analyzed and a developed country. The sovereign yield spread is the differ-ence between a government bo
Mean excess return
Net asset balance sheet exposure
Cash conversion cycle (net operating cycle)
Sovereign yield spread
3. An opportunity to conduct an arbitrage; an opportunity to earn an expected positive net profit without risk and with no net investment of money.
Annuity due
Net revenue
Arbitrage opportunity
Real exchange rate
4. Cash and investments (specifi-cally cash - cash equivalents - and short-term investments) .
Down transition probability
Floor
Nonearning assets
Fixed charge coverage
5. Cannibalization occurs when an investment takes customers and sales away from another part of the company.
Securities offering
Cannibalization
Permutation
Total probability rule for expected value
6. An agreement between two parties to exchange a series of future cash flows.
Swap
Defensive interval ratio
Indexing
Matrix pricing
7. A combination of a long cap and a short floor - or a short cap and a long floor. A col-lar in general can have an underlying other than an interest rate.
Interest rate collar
Voluntary export restraint
Built-up method
Equity forward
8. 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.
Debt rating approach
Exchange ratio
Inventory
Fundamental factor models
9. A striNgent measure of liquidity th t ind'cates a company's ab'li ty to satisfY current liabilities with its most liquid assets - calcu-lated as (cash + short-tenn marketable invest-ments + receivables) divided by current liabilities.
Method based on forecasted fundamentals
Quick ratio - or acid test ratio
Guideline public company method
Elasticity
10. The time remaining in the life of a derivative - typically expressed in years.
Time to expiration
Covered interest arbitrage
Legislative and regulatory risk
Capital asset pricing model (CAPM)
11. A quantitative measure of skew (lack of symmetry); a synonym of skew.
Hmnan capital
Proportionate consolidation
Skewness
Liquidity risk
12. The principle that dol-lar amounts indexed at the same point in time are additive.
Asset retirement obligations (AROs)
Catalyst
Cash flow additivity principle
Scaled earnings surprise
13. Securities held by banks or other financial intermediaries for trading purposes.
Dealing securities
Exchange ratio
Price to cash flow
Upstream
14. The average return in excess of the risk-free rate divided by the standard deviation of return; a measure of the average excess return earned per unit of standard deviation of return.
Proxy statement
Sharpe ratio
Bond yield plus risk premium approach
Safety stock
15. A balance sheet that does not show subtotals for current assets and current liabilities.
Unclassified balance sheet
Comparables (comps - guideline assets - guideline com-panies)
Debt-to-capital ratio
Exhaustive
16. An account that offsets another account.
Interest rate call
Contra account
Defined benefit obligation
Longitudinal data
17. A measure of correlation applied to ranked data.
Multi-step format
Multiplication rule for probabilities
Spearman rank correlation coefficient
Expenses
18. With reference to a sample - the mean of the absolute values of deviations from the sample mean.
Survey approach
Estimation
Cherry-picking
Mean absolute deviation
19. In reference to corporate taxes - a system that imputes - or attributes - taxes at only one level of taxation. For countries using an imputation tax system - taxes on dividends are effectively levied only at the shareholder rate. Taxes are paid at th
Segment ROA
Fair market value
Imputation
Segment turnover
20. The return on a portfolio minus the return on the portfolio's benchmark.
Cash flow at risk (CFAR)
Payoff
Active return
Grant date
21. A record of the change in official reserves - which are the government's holdings offoreign currency.
Official settlements account
Capitalization rate
Linear association
Ordinary shares (common stock or common shares)
22. All changes in equity other than contributions by - and distributions to - own-ers; income under clean surplus accounting; includes all changes in equity during a period except those resulting from investments by own-ers and distributions to owners;
Financial leverage ratio
Day trader
Comprehensive income
Nontariff barrier
23. Future benefits promised to the employee regardless of continuing service. Bene-fits typically vest after a specified period of service or a specified period of service combined with age.
Flip-in pill
Pyramiding
Gross profit argin
Vested benefits
24. A fUl !lction giving the probability of joint occurrences of values of stated random variables.
J oint probability function
Flip-in pill
Objective probabilities
Gross income multiplier (GIM)
25. A public document that provides the material facts concerning matters on which shareholders will vote.
Holder-of-record date
Proxy statement
Inventory turnover
Operating cycle
26. Making forecasts - estimates - or judgments about a larger group from a smaller group actually observed; using a sample statistic to infer the value of an unknown population parameter.
Exposure to foreign exchange risk
Statistical inference
Return on invested capital (ROIC)
Proxy fight
27. An observation drawn from a uni-form distribution.
Interquartile range
Held-for-trading securities (trading securities)
Random number
Real GDP per person
28. Rules for portfolio selection that focus on the risk that portfolio value will fall below some minimum acceptable level over some time horizon.
Reverse stock split
Safety-first Rules
Price discovery
Perpetuity
29. The incor-poration of production planning into inventory management. A MRP analysis provides both a materials acquisition schedule and a production schedule.
Mean
Binomial random variable
Manufacturing resource planning (MRP)
Units-of-production method
30. Aka 'Market efficiency.
Traditional efficient markets formulation
Pyramiding
Replacement value
Agency costs
31. A form of restructuring in which sharehold-ers of a parent company receive a proportional number of shares in a new - separate entity; share-holders end up owning stock in two different companies where there used to be one.
Settlement price
Inverse floater
Spin-off
Statistically significant
32. The use of inventory as collateral for a loan. The inventory is segregated and held in trust - and the proceeds of any sale must be remitted to the lender immediately. t-Test A hypothesis test using a statistic (I-statistic) that follows a t-<listrib
Continuing residual income
Stated rate (nominal rate or coupon rate)
Cost of goods sold
Trust receipt arrangement
33. The cash flow that is real-ized because of a decision; the changes or incre-ments to cash flows resulting from a decision or action.
Absolute dispersion
Salvage value
Incremental cash flow
Trailing P/E (or current PIE)
34. Agency costs that are incurred despite adequate monitoring and bonding of management.
Currency swap
Residual loss
Frequency distribution
Standardized unexpected earnings (SUE)
35. Debt and equity secu-rities not classified as either held-to-maturity or held-for-trading securities. The investor is willing to sell but not actively planning to sell. In general - available-for-sale securities are reported at fair value on the bala
Current credit risk
Cash o£ fering
Time-period bias
Available-for-sale investments
36. Linear regression involv-ing two or more independent variables.
Earnings at risk (EAR)
Management buyout (MBO)
Long-term contract
Multiple linear regression
37. The rule that the joint probability of events A and B equals the probability of A given B times the probability of B.
Discount rate
Net borrower
Dealing securities
Multiplication rule for probabilities
38. Hirschman Index A measure of rna ket concentration that is calculated by summing the squared mar et shares for competing companies in an industry; high HHI readings or mergers that would result in large HHI increases are more likely to result in regu
Synthetic call
Du Pont analysis
Her rmdahl-
Net operating cycle
39. The revaluation of a financial asset or liability to its current market value or fair value.
Exchange ratio
Hostile transaction
Mark-ta-market
Mode
40. The after-tax net operating profits as a percent of total assets or capital.
Platykurtic
Return on invested capital (ROIC)
Clean surplus accounting
Rule of 72
41. 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
Sensitivity analysis
Dividend discount model (DDM)
Deliveryoption
Share-the-gains - share-the-pains theory
42. The volatility that option traders use to price an option - implied by the price of the option and a particulau option-pricing model.
Shortfall risk
Ratio spread
Population variance
Implied volatility
43. The positive square root of the variance; a measure of dispersion in the same units as the original data.
Continuous random variable
Standard deviation
Just-in-time method
Block
44. With reference to cash flow statements - a format for the presenta-tion of the statement which - in the operating cash flow section - begins with net income then shows additions and subtractions to arrive at operatingcash flow.
Pure-play method
Indirect format (indirect method)
Pecking order theory
Economic order quantity-reorder point
45. Additional margin that must be deposited in an amount sufficient to bring the balance up to the initial margin requirement.
Variation margin
Capped swap
Assignment of accounts receivable
Terms of trade
46. The principle that the approximate num-ber of years necessary for an investment to double is 72 divided by the stated interest rate.
Enterprise value (EV)
Exercise or exercising the option
Binomial tree
Rule of 72
47. The Eurodollar rate at which London banks lend dollars to other London banks; considered to be the best representative rate on a dollar borrowed by a private - high-quality borrower.
London Interbank Offer Rate (LIBOR)
Delivery
Control premium
Broker
48. A transaction whereby the target company management team converts the target to a privately held company by using heavy borrowing to finance the purchase of the target company's outstanding shares.
Nominal scale
Monetary assets and liabilities
Optimizer
Leveraged buyout (LBO)
49. A stock's current mar-ket price divided by the most recent four quarters of earnings per share.
Abandonment option
Cost leadership
Catalyst
Trailing P/E (or current PIE)
50. A contract in which one party has the right to claim a payment from another party in the event that a specific credit event occurs over the life of the contract.
Financial reporting quality
Optimizer
Credit derivatives
Outcome