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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. A probability distri-bution for a group of random variables that is completely defined by the means and variances of the variables plus all the correlations between pairs of the variables.






2. Market makers that buy and sell by quoting a bid and an ask price. They are the primary providers ofliquidity to the market.






3. An option to enter into a swap.






4. Debt issued with warrants that give the bondholder the right to purchase equity at prespecified terms.






5. The expected return in excess of the risk-free rate for a portfolio with a sensitivity of 1 to one factor and a sensitivity of 0 to all other factors.






6. PIE PI Es based on normalized EPS data.






7. An approach for estimating a country's equity risk premium. The market rate of return is estimated as the sum of the dividend yield and the growth rate in dividends for a market index. Subtracting the risk-free rate of return from the estimated marke






8. Said of a por tfolio for which eco-nomic sectors are represented in the same pro-portions as in the benchmark - using market-value weights.






9. A profitability ratio calcu-lated as net income divided by average total assets; indicates a company's net profit generated per dollar invested in total assets.






10. Debt (fixed-income) securities that a company intends to hold to matu-rity; these are presented at their original cost - updated for any amortization of discounts or pr.emiums.






11. 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.






12. Estimates of items such as the useful lives of assets - warranty costs - and the amount of uncollectible receivables.






13. The price received to sell an asset or trans-fer a liability.






14. With reference to regression - the set of variables included in the regression and the regression equation's functional form.






15. Heteroskedasticity in the error variance that is correlated with the values of the independent variable(s) in the regression.






16. A varia-tion ofVAR that reflects credit risk.






17. An investment decision rule that states that an investment should be undertaken if its NPV is positive but not undertaken if its NPV is negative.






18. A public document that provides the material facts concerning matters on which shareholders will vote.






19. Factor models that combine features of more than one type of factor model.






20. The rule that the joint probability of events A and B equals the probability of A given B times the probability of B.






21. Agreements made by a company in bankruptcy under which a company's capital struc-ture is altered and/ or alternative arrangements are made for debt repayment; U.S. Chapter II bankruptcy. The company emerges from bank-ruptcyas a going concern.






22. 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.






23. An electronic payment network available to businesses - individuals - and financial institutions in the United States - U.S. -Territories - and Canada.






24. The amount that each unit sold contributes to covering fixed costs- that is - the difference between the price per unit and the variable cost per unit.






25. Any rate used in finding the present value of a future cash flow.






26. The error of not rejecting a false null hypothesis.






27. When assets trans-lated at the current exchange rate are greater in amount than liabilities translated at the current exchange rate. Assets exposed to translation gains or losses exceed the exposed liabilities.






28. Options that - if exercised - would result in the value received being worth more than the payment required to exercise.






29. Options that are far in-the-money.






30. An index fund position cre-ated by combining risk-free bonds and futures on the desired index.






31. An exchange rate is deter-mined by demand and supply with no direct inter-vention in the foreign exchange market by the central bank.






32. Temporary differ-ences that result in a taxable amount in a future period when determining the taxable profit as the balance sheet item is recovered or settled. t-Distribution A symmetrical distribution defined by a single parameter - degrees of free






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






34. The risk associated with changes in the relative attractiveness of products and services offered for sale - arising out of the competitive effects of changes in exchange rates.






35. With respect to the format of a bal-ance sheet - a format in which assets - liabilities - and equity are listed in a single column.






36. Managers who hold portfolios that differ from their benchmark port-folio in an attempt to produce positive risk-adjusted returns.






37. In accounting contexts - cash on hand (e.g. - petty cash and cash not yet deposited to the bank) and demand deposits held in banks and similar accounts that can be used in payment of obligations.






38. The relationship of the quantity of an asset being hedged to the quantity of the deriva-tive used for hedging.






39. With reference to portfolio strategies - the application of a strategy's portfolio selection rules to historical data to assess what would have been the strategy's historical performance.






40. A merger or acquisition in which target shareholders are to receive shares of the acquirer's common stock as compensation.






41. A policy regime is one that selects a target path for the exchange rate with interven-tion in the foreign exchange market to achieve that path.






42. A quantitative measure that describes the location or distribution of data; includes not only measures of central tendency but also other measures such as percentiles.






43. The price for immediate purchase of the underlying asset.






44. A minimum level of cash to be held available-estimated in advance and adjusted for known funds transfers - seasonality - or other factors.






45. A value against which a computed test statistic is compared to decide whether to reject or not reject the null hypothesis.






46. An unlimited funds environment assumes that the company can raise the funds it wants for all profitable projects simply by paying the required rate of return.






47. The probability that an asset's value moves down in a model of asset price dynamics.






48. A conventional cash flow pattern is one with an ini tial outflow followed by a series of in ows.






49. The combination of puts - the underly-ing - and risk-free bonds that replicates a call option.






50. A person or organization seeking to profit by acquiring a company and reselling it - or seeking to profit from the takeover attempt itself (e.g. - greenmail).