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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. The set of assets available for investment.
Strap
Opportunity set
Assets
Weighted average cost method
2. A condition in the futures markets in which a transaction cannot take place because the price would be beyond the limits.
Settlement date or payment date
Supernormal growth
Objective probabilities
Locked limit
3. Covering or containing all possible outcomes.
Liquidity ratios
Gamma
Measure of central tendency
Exhaustive
4. A transformation that involves sub-tracting the mean and dividing the result by the standard deviation.
Conversion factor
Standardizing
Tax risk
Infant-industry argument
5. Revenue that has been earned but not yet billed to customers as of the end of an accounting period.
Revenue
Annual percentage rate
Unbilled revenue (accrued revenue)
Strategic transaction
6. The estimation of an unknown value on the basis of two known values that bracket it - using a straight line between the two known values.
Capital allocation line (CAL)
Cash settlement
Linear interpolation
Top-down forecasting approach
7. A profitability ratio calcu-lated as net income divided by average sharehold-ers' equity.
Net asset balance sheet exposure
Treasury stock method
Amortization
Return on equity (ROE)
8. Heteroskedasticity in the error variance that is correlated with the values of the independent variable(s) in the regression.
Heteroskedastic
Conditional heteroskedasticity
Sum-of-the-parts valuation
Amortizing and accreting swaps
9. A strategy in which a position is hedged by making frequent adjustments to the quantity of the instrument used for hedging in relation to the instrument being hedged.
Overnight index swap (OIS)
Accounts receivable turnover
Relative frequency
Dynamic hedging
10. The probability-weighted average of the possible outcomes ofa random variable.
Expected value
Sampling distribution
Dividend displacement of earnings
Generalized least squares
11. 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.
Deciles
Expected value
Index amortizing swap
Corporate governance
12. The price at which an asset or liability would change hands between a willing buyer and a willing seller whe n the former is not under any compulsion to buy and the latter is not under any compulsion to sell; the price that would be received to sell
Median
Fair value
Implied repo rate
Optimal capital structure
13. Assets that are expected to provide economic benefits over a future period of time - typically greater than one year.
Cash ratio
Long-lived assets (or long-term assets)
Serially correlated
Sample selection bias
14. The unsold units of product on hand.
Eurodollar
Inventory
Target capital structure
Terminal share price
15. The property of having a constantvariance; refers to an error term that is constantacross observations.
Bottom-up investing
Accumulated depreciation
Homoskedasticity
Macroeconomic factor
16. A set of observations on a variable's out-comes in different time periods.
Direct f'mancing lease
Root mean square(l er ror (RMSE)
Exp ected holding-period return
Time series
17. An index fund position cre-ated by combining risk-free bonds and futures on the desired index.
American
Synthetic index fund
IRR rule
Salvage value
18. A stage of growth in which a company typically enjoys rapidly expanding markets - high profit margins - and an abnormally high growth rate in earnings per share.
Asset purchase
Electronic funds transfer
Growth phase
First-order serial correlation
19. 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.
Proxy fight
Multiple linear regression model
Neoclassical growth theory
Unconditional probability (or marginal probability)
20. The minimum real wage rate needed to maintain life.
Specific identification method
Multiple
Subsistence real wage rate
Interest rate floor or floor
21. A mean computed after excluding a stated small percentage of the lowest and highest observations.
Held-to-maturity investments
Trimmed mean
Intergenerational data mining
Dirty surplus accounting
22. The amount to which a payment or series of payments will grow by a stated future date.
Future value (FV)
Dividends per share
Pyramiding
Identifiable intangible
23. The cash flow available to a company's common shareholders after all operat-ing expenses - interest - and principal payments have been made - and necessary investments in working and fixed capital have been made.
Cash
Option price - option premium - or premium
Free cash flow to equity
Swap
24. 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.
Residual dividend approach
Benchmark value of the multiple
Interest rate collar
Operating profit (operating income)
25. The day that options are granted to employees; usually the date that compensation expense is measured if both the number of shares and option price are known.
Debt with warrants
Grant date
Continuously compounded return
Sample standard deviation
26. The quoted interest rate per period; the stated annual interest rate divided by the number of compounding periods per year.
Bear hug
U.S. GAAP and uniting of interests under IFRS
Periodic rate
Monetary assets and liabilities
27. 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.
Pooling of interests accounting method
Illiquidity discount
Up transition probability
Defined benefit obligation
28. A tax that is imposed by the importing coun-try when an imported good crosses its interna-tional boundary.
Caplet
Band-of-investment method
Tariff
Working capital
29. Cash-settled for-ward contracts - used predominately with respect to foreign exchange forwards.
Her rmdahl-
Nondeliverable forwards (NDFs)
Treasury stock method
Contingent consideration
30. The portion of an entity's income that is subject to income taxes under the tax laws of its jurisdiction.
Taxable income
Residual claim
Principal
Screening
31. A procedure for determining the interest on a bond or loan in which the interest is added onto the face value of a contract.
Add-on interest
Warehouse receipt arrangement
Unbiasedness
Degree of total leverage
32. Numbers produced by random number generators.
Pseudo-random numbers
Management buyout (MBO)
Poison pill
Volatility
33. Research and development costs relating to projects that are not yet completed - such as have been incurred by a company that is being acquired.
Relative valuation models
In-process research and development
Periodic rate
Ordinal scale
34. The first in - first out - method of accounting for inventory - which matches sales against the costs of items of inventory in the order in which they were placed in inventory.
Equitizing cash
FIFO method
Matching principle
Accelerated methods of depreciation
35. The perceived ability of the bor-rower to pay what is owed on the borrowing in a timely manner; it represents the ability of a com-pany to withstand adverse impacts on its cash flows.
Creditworthiness
Total asset turnover
Net exports
Management buyout (MBO)
36. With reference to a sample - the mean of the absolute values of deviations from the sample mean.
Exchange for physicals (EFP)
Mean absolute deviation
Pure discount instruments
Intergenerational data mining
37. A pre-offer takeover defense mechanism that makes it prohibitively costly for an acquirer to take control of a target without the prior approval of the target's board of directors.
Poison pill
Index option
Multiple linear regression model
Annuity due
38. An option that gives the holder the right to buy an underlying asset from another party at a fixed price over a specific period of time.
Fixed asset turnover
Scaled earnings surprise
Call
Mutually exclusive projects
39. A profitability ratio calculated as (net income - preferred divi-dends) divided by average common equity; equal to the return on equity ratio when no preferred equity is outstanding.
North
Data mining
Permanent differences
Return on common equity (ROCE)
40. A transformation that subtracts the value of the time series in period t - 1 from its value in period t.
First-differencing
Arbitrage portfolio
Multiple
Classified balance sheet
41. An offset to property - plant - and equipment (PPE) reflecting the amount of the cost of PPE that has been allocated to current and previous accounting periods.
Discount interest
Accumulated depreciation
Financial leverage
Return on invested capital (ROIC)
42. Options that are far in-the-money.
Posterior probability
Deep in the money
Confidence interval
Initial public offering (IPO)
43. A sample measure of the degree of a distribution's peakedness.
Sole proprietorship
Trimmed mean
Credit
Sample kurtosis
44. The amount by which the takeover price for each share of stock must exceed the current stock price in order to entice shareholders to relinquish control of the com-pany to an acquirer.
Cash
Takeover premium
No-growth company
Unclassified balance sheet
45. The return on an asset in excess of the asset's required rate of return; the risk-adjusted return.
Equity forward
Enterprise risk management
At the money
Alpha (or abnormal return)
46. In accounting - a liability of uncertain tim-ing or amount.
Pet projects
Capital account
Pure-play method
Provision
47. The price multiple for a stock assumed to hold at a stated future time.
Going-concern assumption
Terminal price multiple
Put-call-forward parity
Earnings yield
48. With reference to statistical inference - astatement about one or more populations.
Spin-off
Hypothesis
Purchasing power gain
Rate-of-return regulation
49. The amount of dispersion rela-tive to a reference value or benchmark.
Adjusted R2
Relative dispersion
Cost of equity
Cumulative relative frequency
50. The expected excess return on the market over the risk-free rate.
Statement of cash flows (cash flow statement)
Breusch-Pagan test
Clearinghouse
Market risk premium