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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. In reference to short-term cash man-agement - an investment strategy characterized by monitoring and attempting to capitalize on mar-ket conditions to optimize the risk and return relationship of short-term investments.






2. An increase in a company's earnings that results as a consequence of the idio-syncrasies of a merger transaction itself rather than because of resulting economic benefits ofthe combination.






3. 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.






4. A market index portfolio.






5. The present value of an investment's cash inflows (benefits) minus the present value of its cash outflows (costs).






6. The seller of a derivative contract. Also refers to the position of being short a derivative.






7. Method used to estimate the overall capitalization rate by dividing the sale price of a comparable income property into the net operating income.






8. A record of the change in official reserves - which are the government's holdings offoreign currency.






9. The purchase of the accumulated shares of a hostile investor by a company that is targeted for takeover by that investor - usually at a substan-tial premium over market price.






10. Purchases of one product that are per-mitted by the seller only if the consumer buys another good or service from the same firm.






11. A tax that is imposed by the importing coun-try when an imported good crosses its interna-tional boundary.






12. 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.






13. The number of shares that would beoutstanding if all potentially dilutive claims oncommon shares (e.g. - convertible debt - convert-ible preferred stock - and employee stock options)were exercised.






14. A process used in a deliverable forward contract in which the long pays the agreed-upon price to the short - which in turn delivers the underlying asset to the long.






15. The day that employees actually exer-cise the options and convert them to stock.






16. The company's total cost of capital in money terms.






17. The market for short-term debt instruments (one-year maturity or less).






18. The amount at which an asset or liability is valued according to account-ing principles.






19. An arrangement whereby someone - an agent - acts on behalf of another per-son - the principal.






20. When disbursements are paid tooquickly or trade credit availability is limited -requiring companies to expend funds beforethey receive funds from sales that could cover theliability.






21. The risk associated with accounting standards that vary from country to country or with any uncertainty about how certain transac-tions should be recorded.






22. The minimum rate of return required by an investor to invest in an asset - given the asset's riskiness.






23. With reference to investment selection processes - an approach that starts with macro selection (i.e. - identifying attractive geo-graphic segments andVor industry segments) and then addresses selection 0 the most attractive investments within those






24. An entity (partnership - corporation - or other legal form) where control is shared by two or more entities called venturers.






25. Each value on a binomial tree from which suc-cessive moves or outcomes branch.






26. 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.






27. A bank commitment to extend credit up to a pre-specified amount; the commitment is considered a short-term liability and is usually in effect for 364 days (one day short of a full year).






28. (Aka forward rate agreement)






29. Quantiles that divide a distribution into five equal parts.






30. A company's chosen propor-tions of debt and equity.






31. A level of inventory beyond anticipated needs that provides a cushion in the event that it takes longer to replenish inventory than expected or in the case of greater than expected demand.






32. 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.






33. A swap in which the underlying is a commodity such as oil - gold - or an agricultural product.






34. The buyer of a derivative contract. Also refers to the position of owning a derivative.






35. An association or relationship between variables that cannot be graphed as a straight line.






36. Regulation that seeks to keep the rate of return in the industry at a com-petitive level by not allowing excessive prices to be charged.






37. Assets less liabilities; the residual interest in the assets after subtracting the liabilities.






38. A procedure by which a population is divided into subpopulations (strata) based on one or more classification criteria. Sim-ple random samples are then drawn from each stratum in sizes proportional to the relative size of each stratum in the populati






39. A form of restructuring that involves the creation of a new legal entity and the sale of equity in it to outsiders.






40. A swap in which one party agrees to pay the total return on a security. Often used as a credit derivative - in which the underlying is a bond.






41. A forecasting process in which the next period's value as predicted by the forecasting equation is substituted into the right-hand side of the equation to give a predicted value two periods ahead.






42. 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.






43. A profitabili ty ratio calcu-lated as EBIT divided by the sum of short-and long-te debt and equi ty.






44. Asset allocation in which the invest-ment in the market is increased if one forecasts that the market will outperform T-bills.






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






46. The value of exports of goods and ser-vices minus the value of imports of goods and services.






47. A theory of economic growth based on the view that the growth of real GDP per person is temporary and that when it rises above subsistence level - a population explo-sion eventually brings it back to subsistence level.






48. A theory of economic growth based on the idea that real CDP per person grows because of the choices that people make in the pursuit of profit and that growth can persist indefinitely.






49. An opportunity to conduct an arbitrage; an opportunity to earn an expected positive net profit without risk and with no net investment of money.






50. The fixed price or rate at which the transaction scheduled to occur at the expiration of a forward contract will take place. This price is agreed on at the initiation date of the contract.