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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 expected value of a stated event given that another event has occurred.
Entry price
Conditional expected value
Longitudinal data
Investment strategy
2. Any rate used in finding the present value of a future cash flow.
Standard normal distribution (or unit normal distribu-tion)
Gross income multiplier (GIM)
Discount rate
Lack of marketability discount
3. Orders to buy or sell that are too large for the liquidity ordinarily available in dealer networks or stock exchanges.
Block
Build-up method
Book value of equity (or book value)
Quality of earnings analysis
4. The elimination or phasing out of reg-ulations on economic activity.
Deferred tax liabilities
Interval
Time series
Deregulation
5. Activities that are part of the day-to-day business functioning of an entity - such as selling inven tory and providing services.
Cost recovery method
Portfolio selection/composition problem
Operating activities
Statistically significant
6. The process by which options and other derivatives are priced by treating investors as though they were risk neutral.
Probability
Risk-neutral valuation
Fixed costs
Revenue
7. The revaluation of a financial asset or liability to its current market value or fair value.
Terminal price multiple
Vested benefits
Mark-ta-market
Present (price) value of a basis point (PVBP)
8. A test that is not concerned with a parameter - or that makes minimal assumptions about the population from which a sam Ie comes.
Nonparametric test
Cannibalization
Call
Inventory turnover
9. A conventional cash flow pattern is one with an ini tial outflow followed by a series of in ows.
Portfolio selection/composition problem
Conventional cash flow
Correlation analysis
Conglomerate merger
10. An increment or premium to value associated with a controlling ownership interest in a company.
Trend
Cash-flow-statement-based aggregate accruals
Control premium
Legal risk
11. A balance sheet liability that arises when a deficit amount is paid for income taxes relative to accounting profit. The taxable income is less than the accounting profit and income tax payable is less than tax expense. The company expects to eliminat
Deferred tax liabilities
Justified (fundamental)
Earnings per share
Modal interval
12. CMT swap A swap in which the floating rate is the rate on a security known as a constant maturity treasury or CMT security.
Return on invested capital (ROIC)
Bond yield plus risk premium approach
Negative serial correlation
Constant maturity swap or
13. Projects in which influential managers want the corporation to invest. Often - unfortu-nately - pet projects are selected without undergo-ing normal capital budgeting analysis.
Overall capitalization rate
Sinking fund factor
Pet projects
Manufacturing resource planning (MRP)
14. Method of valu-ing property based on recen t sales prices of simi-lar properties.
Null hypothesis
Direct sales-comparison approach
Dividends per share
Weighted mean
15. Private equity investors in development-stage companies.
Classical growth theory
Noncurrent
Venture capital investors
Amortization
16. A measure of sensitivity; the incremental change in one variable with respect to an incre-mental change in another variable.
Unlimited funds
Coefficient of variation (CV)
Initial public offering (IPO)
Elasticity
17. The company in a merger or acquisition that is acquiring the target.
Acquiring company - or acquirer
Single-payment loan
Lack of marketability discount
Write-down
18. A company that has similar business risk; usually in the same industry and preferably with a single line of business.
Minority passive investments (passive investments)
Asset-based valuation
omparable company
Price multiple
19. With eference to grouped data - a se t or val-ues within w ich an observation falls.
Defined-benefit pension plans
Income tax payable
Interval
Financial reporting quality
20. 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.
Clientele effect
Historical method
Quantile (or fractile)
Inverse price ratio
21. An interest rate swap in which one party pays a fixed rate and the other pays a float-ing rate - with both sets of payments in the same currency.
Illiquidity discount
Plain vanilla swap
Paired observations
Acquisition method
22. The preference some investors have for shares that exhibit certain characteristics.
Clientele effect
Split-rate
Bond-equivalent yield
Variation margin
23. With respect to revenue recognition - a method that s ecifies that the portion of the total profit of the sale that . s recognized in each pe riod is deter-mined by the percentage of the total sales price for which the seller has received cash.
European-style option or
Accumulated depreciation
P Value
Installment method (installment-sales method)
24. A regression that expresses the dependen t and independent vari-ables as natural logarithms.
Exhaustive
Log-log regression model
Agency costs
Factor sensitivity (also factor betas or factor loadings)
25. Securities held by banks or other financial intermediaries for trading purposes.
Chart of accounts
Goodwill
Dealing securities
Binomial model
26. An option strategy involving the hold-ing of an asset and sale of a call on the asset.
Trade receivables (commercial receivables or accounts receivable)
Covered call
Level of significance
Active risk squared
27. The risk associated with the uncer-tainty of how derivative transactions will be regu-lated or with changes in regulations.
Regulatory risk
Descriptive statistics
LIFO layer liquidation (LIFO liquidation)
Top-down analysis
28. The difference between reported net income on an accrual basis and the cash flows from operating and investing activities.
Reverse stock split
Cash-flow-statement-based aggregate accruals
Proportionate consolidation
Autoregressive (AR) model
29. A list of accounts used in an entity's accounting system.
Chart of accounts
Storage costs or carrying costs
Historical simulation (or back simulation)
Going-concern value
30. A transformation that subtracts the value of the time series in period t - 1 from its value in period t.
Operating return on assets (operating
Vesting date
Spin-off
First-differencing
31. A money measure of the goods and services produced within a country's borders over a stated time period.
Presentation currency
Interest rate parity
Gross domestic product
A priori probability
32. The management of a company's short-term assets (such as inventory) and short-term liabilities (such as money owed to suppliers) .
Equity carve-out
First-differencing
Working capital management
Maintenance margin requirement
33. An acquisition in which the acquirer gives the target company's shareholders some combination of cash and securities in exchange for shares of the target company's stock.
Stock purchase
Ordinary shares (common stock or common shares)
Cross-product netting
Partial regression coefficients or partial slope coeffi-cients
34. The condition of being of sufficient importance so that omission or misstatement of the item in a financial report could make a differ-ence to users' decisions.
Overnight index swap (OIS)
Fundamental beta
Materiality
Standard deviation
35. The value of the U.S. dollar in terms of other currencies in the foreign exchange market.
Present (price) value of a basis point (PVBP)
Infant-industry argument
Nonlinear relation
Exchange rate
36. Items that affect comprehensive income but which bypass the income statement.
Receivables turnover
U.S. GAAP and uniting of interests under IFRS
Probability
Dirty surplus items
37. The difference between the third and fi rst quarti les of a dataset.
Grant date
Interquartile range
Bill-and-hold basis
Harmonic mean
38. Netting the market values of all contracts - not just derivatives - between parties.
No-growth company
Market value of invested capital
Cross-product netting
Normalized earnings per share (or normal earnings per share)
39. The probability of the joint occur-rence of stated even ts.
Serially correlated
Joint probability
Market timing
Working capital management
40. A financial statement that reconciles beginning-of-period and end-of-period balance sheet values of cash; provides information about an entity's cash inflows and cash outflows as they pertain to oper-ating - investing - and financing activities.
Statement of cash flows (cash flow statement)
Leveraged recapitalization
Current account
Perfect collinearity
41. The risk that a financial instrument cannot be purchased or sold without a significant concession in price due to the size of the market.
Weighted harmonic mean
Arithmetic mean
Mean excess return
Liquidity risk
42. With reference to time-series mod-els - a model in which the growth rate of the time series as a function of time is constant.
Log-linear model
Share repurchase
Sampling
ackwardation
43. An extra return that compen-sates investors for expected inflation.
Bond-equivalent yield
Financial reporting quality
Covered call
Inflation premium
44. 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
Risk-neutral probabilities
Lockbox system
Alternative hypothesis
Terminal share price
45. A quantity whose future outcomes are uncertain.
Active risk squared
Eurodollar
Just-in-time method
Random variable
46. Expectations that differfrom consensus expectations.
Compiled f'mancial statements
Differential expectations
NPV rule
Optimal capital structure
47. The currency of the primary economic environment in which an entity operates.
Functional currency
One third rule
Bear spread
Differential expectations
48. A tool that calculates the contri-bution to real CDP growth of each of its sources.
Ex-dividend date
Growth accounting
IRR rule
Capitalized inventory costs
49. The strategy of using futures contracts to enter the market without an immediate outlay of cash.
Long-term equity anticipatory securities (LEAPS)
Share-the-gains - share-the-pains theory
Empirical probability
Pre-investing
50. An option in which the holder has the right to make a known interest payment and receive an unknown interest payment.
Installment
Going-concern assumption
Interest rate call
Net realizable value