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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. Profits lost from not having suffi-cient inventory on hand to satisfy demand.






2. A criterion asserting that the optimal portfolio is the one that minimizes the probability that portfolio return falls below a threshold level.

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






4. Making forecasts - estimates - or judgments about a larger group from a smaller group actually observed; using a sample statistic to infer the value of an unknown population parameter.






5. Net earnings avail-able to common shareholders (i.e. - net income minus preferred dividends) divided by the weighted average number of common shares out-standing during the period.






6. A contract in which one party has the right to claim a payment from another party in the event that a specific credit event occurs over the life of the contract.






7. 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.






8. The operational flexibility to alter production when demand varies from fore-cast. For example - if demand is strong - a company may profit from employees working overtime or from adding additional shifts.






9. Segment revenue divided by seg-ment assets .






10. The procedure of drawing a sample to satisfy the definition of a simple ran-dom sample.






11. The risk associated with interest rates - exchange rates - and equity prices.






12. The expected value of a stated event given that another event has occurred.






13. A method of valuing prop-erty based on site value plus current construction costs less accrued depreciation.






14. Above average or abnormally high growth rate in earnings per share.






15. Under U.S. GAAP -a special purpose entity structured to avoid consol-idation that must meet qualification criteria.






16. Said of a sale in which proceeds are to be paid in installments over an extended period of time.






17. An active investment strategy whereby the timing of cash outflows is not matched with investment maturities.






18. Segment liabilities divided by segment assets.






19. A specialized computer program or a spreadsheet that solves for the portfolio weights that will result in the lowest risk for a specified level of expected return.






20. A means of settling payments in which the amount owed by the first party to the second is netted with the amount owed by the sec-ond party to the first; only the net difference is paid.






21. An interest rate swap in which the notional principal is indexed to the level of interest rates and declines with the level ofinterest rates according to a predefined schedule. This type of swap is frequently used to hedge secu-rities that are prepai






22. The analyst'S estimate of a stock's value at a particular point in the future .






23. A forecasting approach that involves aggregating the individual company forecasts of analysts into industry fore-casts - and finally into macroeconomic forecasts.






24. The return on a portfolio minus the return on the portfolio's benchmark.






25. Costs (e.g. - executives' salaries) that cannot be directly matched with the timing of rev-enues and which are thus expensed immediately.






26. Method of managing inventory that minimizes in-process inventory stocks. kth order autocorrelation The correlation between observations in a time series separated by k periods.






27. A swap transaction in which at least one cash flow is tied to the return to an equity portfo-lio position - often an equity index.






28. FIrm model A model of stock valuation that views the value of a firm as the pres-ent value of expected future free cash flows to the firm.






29. A model that specifies an asset's intrinsic value.






30. A subset of a population.






31. The value to a specific buyer - tak-ing account of potential synergies based on the investor's requirements and expectations.






32. The amount of cash payable by a company to the bondholders when the bonds mature; the promised payment at maturity sepa-rate from any coupon payment.






33. The line with an inter-cept point equal to the risk-free rate that is tangent to the efficient frontier of risky assets; represents the efficient frontier when a risk-free asset is available for investment.






34. An active investment strategy that includes intentional matching of the timing of cash outflows with investment maturities.






35. American Free Trade Agreement An agree-ment - which became effective on January 1 - 1994 - to eliminate all barriers to international trade between the United States - Canada - and Mexico after a 15-year phasing-in period.






36. Cash-settled for-ward contracts - used predominately with respect to foreign exchange forwards.






37. The expected excess return on the market over the risk-free rate.






38. Options that - if exercised - would require the payment of more money than the value received and therefore would not be cur-rently exercised.






39. A legal entity with rights similar to those of a person. The chief officers - executives - or top managers act as agents for the firm and are legally entitled to authorize corporate activi-ties and to enter into contracts on behalf of the business.






40. A wholly-owned sub-sidiary of a company that is established to provide financing of the sales of the parent company.






41. The probability of a Type I error in testing a hypothesis.






42. Bias introduced by systemati-cally exclua ing some members of the population according to a particular attribute-for example - the bias introduced when data availability leads to certain observations being excluded from the analysis.






43. CAPM An adaptation of the CAPM that adds to the CAPM a premium for small size and company-specific risk.






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






45. An illiquidity discount that occurs when an investor sells a large amount of stock rela-tive to its trading volume (assuming it is not large enough to constitute a controlling ownership).






46. Agreements between the company as borrower and its creditors.






47. A variation of a floating-rate note that has some type of unusual characteristic such as a leverage factor or in which the rate moves opposite to interest rates.






48. The owners' remaining claim on the company's assets after the liabilities are deducted.






49. A swaption that allows the holder to enter into a swap as the fixed-rate payer and floating-rate receiver.






50. A business's value under a going-concern assumption.