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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. To defer the decision to invest in a future projecn until the outcome of some or all of a current project is known. -Projects are sequenced through time - so that investing iN a project creates the option to invest in future projects.






2. The posi tive square root of tar-get semivar·ance.






3. Futures contracts in which the underlying is a stock - bond - or currency.






4. Lack of bias. A desirable property of estimators - an unbiased estimator is one whose expected value (the mean of its sampling distri-bution) equals the parameter it is intended to estimate.






5. A valuation ratio calculated as price per share divided by sales per share.






6. A decision rule for choos-ing between two investments based on their means and variances.






7. 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.






8. As used in option pricing - the standard deviation of the continuously compounded returns on the underlying asset.






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






10. A type of qualitative variable that takes on a value of 1 if a particular condition is true and 0 if that condition is false.






11. Aka also enterprise risk management.






12. A forward contract in which the underlying is a foreign currency.






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






14. Ratios that measure a company's ability to generate profitable sales from its resources (assets).






15. The stage of growth between the growth phase and the mature phase of a company in which earnings growth typically slows.






16. An option contract that can be exercised at any time until its expiration date.






17. The relationship between the option price and the underlying price - which reflects the sensi-tivity of the price of the option to changes in the price of the underlying.






18. An approach to valuation that involves using a price multiple to evaluate whether an asset is relatively fairly valued - rela-tively undervalued - or relatively overvalued when compared to a benchmark value of the multiple.






19. A finan-cial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its oper-ations; equal to days of inventory on hand + days of sales outstanding - number of days of






20. 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.






21. Valuation approach that values an asset as the present discounted value of the income expected from it.






22. ROA) A prof-itability ratio calculated as operating income divided by average total assets.






23. A distribution that specifies the probabilities of a random variable's possible outcomes.






24. A result indicating that the null hypothesis can be rejected; with reference to an estimated regression coefficient - frequently understood to mean a result indicating that the corresponding population regression coefficient is different from O.






25. A transaction in which a position in the underlying is protected by buying a put and selling a call with the premium from the sale of the call offsetting the premium from the purchase of the put. It can also be used to protect a floating-rate borrowe






26. The day that the company actually mails out (or electronically transfers) a dividend payment.






27. Transactions that are denominated in a currency other than a com-pany's functional currency.






28. A solvency ratio calculated as total debt divided by total assets.






29. 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.






30. An agreement allowing the lessee to use some asset for a period of time; essentially a rental.






31. Asset outflows not directly related to the ordi-nary activities of the business.






32. The expansion of production pos-sibilities that results from capital accumulation and technological change.






33. A transformation that subtracts the value of the time series in period t - 1 from its value in period t.






34. A measurement scale that categorizes data but does not rank them.






35. A contract signed by both parties to a merger that clarifies the details of the transaction - including the terms - war-ranties - conditions - termination details - and the rights of all parties.






36. Earnings per share divided by price; the reciprocal of the PIE ratio.






37. The capital structure at which the value of the company is maximized.






38. With reference to a sample - the mean of the absolute values of deviations from the sample mean.






39. Financial instru-ments that an entity chooses to measure at fairvalue per lAS 39 or SFAS 159. Generally - the elec-tion to use the fair value option is irrevocable.






40. The margin requirement on any day other than the first day of a transaction.






41. 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.






42. The feature of a futures contract giv-ing the short the right to make decisions about what - when - and where to deliver.






43. The analysis of the total variability of a dataset (such as observations on the dependent variable in a regression) into components representing different sources of variation; with reference to regression - ANOVA provides the inputs for an F-test of






44. The unsold units of product on hand.






45. A rule explaining the expected value of a random vari-able in terms of expected values of the random variable conditional on mutually exclusive and exhaustive scenarios.






46. The difference between the market price of the option and its intrinsic value - determined by the uncertainty of the underlying over the remaining life of the option.






47. The fixed rate at which the holder of an interest rate option can buy or sell the underlying.






48. The risk of a change in value of a n asset or liability denomi-nated in a foreign currency due to a change in exchange rates.






49. The money of other countries regardless of whether that money is in the form of notes - coins - or bank deposits.






50. A measure of a bond's price sen-sitivity to interest rate movements. Equal to the Macaulay duration of a bond divided by one plus its yield to maturity.