SUBJECTS
|
BROWSE
|
CAREER CENTER
|
POPULAR
|
JOIN
|
LOGIN
Business Skills
|
Soft Skills
|
Basic Literacy
|
Certifications
About
|
Help
|
Privacy
|
Terms
|
Email
Search
Test your basic knowledge |
CFA Level2 Vocab
Start Test
Study First
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. The U.S. interest rate minus the foreign interest rate.
Credit-linked notes
Put-call-forward parity
Asian call option
U.S. interest rate differential
2. The square root of the average squared forecast error; used to compare the out-of-sample forecasting perfor-mance of forecasting models.
Simple random sample
Alpha (or abnormal return)
Root mean square(l er ror (RMSE)
Capitalized cash flow model (method)
3. A record of the change in official reserves - which are the government's holdings offoreign currency.
Sales returns and allowances
Current cost
Official settlements account
Safety-first Rules
4. A range that has a given proba-bility that it will contain the population parameter it is intended to estimate.
Delta
Confidence interval
Implied volatility
Entry price
5. Common sharehold-ers' equity minus intangible assets from the bal-ance sheet - divided by the number of shares outstanding.
Takeover premium
Efficient portfolio
Tangible book value per share
Laddering strategy
6. 1) An agent who executes orders to buy orsell securities on behalf of a client in exchange for a commission. 2) See Futures commission merchants.
Currency option
No-growth company
Broker
Test statistic
7. Short-term obligations - such as accounts payable - wages payable - or accrued liabil-ities - that are expected to be settled in the near future - typically one year or less.
Default risk premium
Seats
Current liabilities
Long-term contract
8. The status of a company in the sense of whether it is assumed to be a going con-cern or not.
Premise of value
Due diligence
Linear association
Point of sale
9. 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.
Diffuse prior
Safety stock
Safety-first Rules
Systematic sampling
10. Arrangements that do not result in additional liabilities on the balance sheet but nonetheless create economic obligations.
NPV rule
Off-balance sheet imancing
Monte
Defined-contribution pension plans
11. 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.
Real options
Payout ratio
Free cash flow to the
Caplet
12. Options that are far out-of-the-money.
Floorlet
Deep out of the money
Days of sales outstanding (DSO)
Exchange rate
13. The difference between operat-ing assets (total assets less cash) and operating lia-bilities (total liabilities less total debt).
Net operating assets
Kurtosis
Fair value
Net liability balance sheet exposure
14. Observations on characteristic(s) of the same observational unit through time.
Project sequencing
Deliveryoption
Longitudinal data
Bundling
15. A balance sheet asset that arises when an excess amount is paid for income taxes relative to accounting profit. The taxable income is higher than accounting profit and income tax payable exceeds tax expense. The company expects to recove r the differ
Externality
Deferred tax assets
Semilogarithmic
Contingent consideration
16. Ratios that measure a company's ability to meet its long-term obligations.
Economic growth
Asset-based loan
Put-call-forward parity
Solvency ratios
17. A general strategy usually thought of as reducing - if not eliminating - risk.
Yield beta
Capital charge
Hedging
Common size statements
18. A procedure used in certain deriva-tive transactions that specifies that the long and short parties engage in the equivalent cash value of a delivery transaction.
Adjusted beta
Cash settlement
Method based on forecasted fundamentals
Derivatives dealers
19. The after-tax net operating profits as a percent of total assets or capital.
Commodity futures
Return on invested capital (ROIC)
Capital allocation line (CAL)
Statistics
20. A merger in which one company ceases to exist as an identifiable entity and all its assets and liabilities become part of a purchasing company.
Skewness
Credit spread option
Statutory merger
Purchasing power gain
21. A value against which a computed test statistic is compared to decide whether to reject or not reject the null hypothesis.
Market price of risk
Rejection point (or critical value)
Commodity option
Liquidity premium
22. In the con-text of private company valuation - valuation model based on an assumption of a constant growth rate of free cash flow to the firm or a con-stant growth rate of free cash flow to equity.
Vertical common-size analysis
Committed lines of credit
Capitalized cash flow model (method)
Dividend displacement of earnings
23. A legal contract specifYing the terms of a bond issue.
Reputational risk
Bond indentnre
Mesokurtic
Pooled estimate
24. An asset that trades in a market in which buyers and sellers meet - decide on a price - and the seller then delivers the asset to the buyer and receives payment. The underlying is the asset or other derivative on which a particular derivative is base
Contango
Underlying
Days of sales outstanding (DSO)
Forward swap
25. Aka Harmonic mean.
Degree of operating leverage (DOL)
Weighted harmonic mean
Liruit move
Grouping by function
26. Businesses with high sensitivity to business- or industry-cycle influences.
Cyclical businesses
Agency problem - or principal-agent problem
Standardizing
Relative strength (RSTR) indicators
27. The number of successes in n Bernoulli trials for which the probability of success is constan t for all trials and the trials are independent.
Covariance
Yield spread
Markowitz decision rule
Binomial random variable
28. The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or groups of assets.
Cash-generating unit
Null hypothesis
Minority passive investments (passive investments)
Sunk cost
29. The probability of the joint occur-rence of stated even ts.
Joint probability
Cyclical businesses
Shareholders' equity
Amortization
30. Analysts who work at brokerages.
Qualitative dependent variables
Real options
Sell-side analysts
Alternative hypothesis
31. In the context of the Treynor-Black model - the portfolio formed by mixing analyzed stocks of perceived nonzero alpha values. This portfolio is ultimately mixed with the passive mar-ket index portfolio.
Growth accounting
Active portfolio
Sustainable growth rate
Sales returns and allowances
32. A specifi-cation of how 'value' is to be understood in the context of a specific valuation.
Fixed asset turnover
Definition of value (or standard of value)
Node
Net lender
33. Options that relate to investment deci-sions such as the option to time the start of a proj-ect - the option to adjust its scale - or the option to abandon a project that has begun.
Model specification
Real options
Liquidation value
Monte
34. A statistical model used to clas-sifY borrowers according to creditworthiness.
Collar
Imputation
Credit scoring model
Frequency polygon
35. 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.
Shareholders' equity
Historical method
Share repurchase
Income tax recoverable
36. The existence of an exact linear relation between two or more independent vari-ables or combinations of independent variables.
Statistically significant
Delta
Normal backwardation
Perfect collinearity
37. The graph of the set of portfolios that have minimum variance for their level of expected return.
Parametric test
Leverage
Yield to maturity
Minimum-variance frontier
38. Liabilities related to expenses that have been incurred butnot yet paid as of the end of an accountingperiod-an example of an accrued expense is rent that has been incurred but not yet paid -resulting in a liability 'rent payable.'
Cash flow additivity principle
Debt-to-equity ratio
LIFO layer liquidation (LIFO liquidation)
Accrued expenses (accrued liabilities)
39. The date of the final paymen on a swap' also - the swap's e piration date.
Balance of payments accounts
Termination date
Tenor
Credit derivatives
40. A commercial imple-mentation of the residual income concept; the computation of EVA® is the net operating profit after taxes minus the cost of capital - where these inputs are adjusted for a number of items.
Current account
Economic value added (EVA)
Correlation
Balance sheet (statement of fmandal position or state-ment of fmandal condition)
41. A transaction between two affiliates - an investor company and an associate company such that the associate company records a profit on its income statement. An example is a sale of inven-tory by the associate to the investor company.
Direct debit program
Return on invested capital (ROIC)
Dividends per share
Upstream
42. Investing on the basis of dif-ferential expectations.
Expectational arbitrage
Sales returns and allowances
Regime
Reporting unit
43. A theory pertaining to a company's optimal capital struc-ture; the optimal level of debt is found at the point where additional debt would cause the costs of financial distress to increase by a greater amount than the benefit of the additional tax sh
Designated fair value instruments
No-growth value per share
Static trade-off theory of capital structure
Working capital turnover
44. A solvency ratio calculated as total debt divided by total assets.
Lack of marketability discount
Plain vanilla swap
Debt-to-assets ratio
Method based on forecasted fundamentals
45. The theory that managers take into account how their actions might be inter-preted by outsiders and thus order their prefer-ences for various forms of corporate financing. Forms of financing that are least visible to out-siders (e.g. - internally gen
Common size statements
Pecking order theory
Statistics
Probability density function
46. Describes a distribution that is more peaked than a normal distribution.
Historical method
Leptokurtic
Multiple linear regression
Enhanced derivatives products companies (EDPC)
47. 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.
Eurodollar
North
Du Pont analysis
Molodovsky effect
48. An active investment strategy whereby the timing of cash outflows is not matched with investment maturities.
Tax risk
Money market
Forward P/E (also leading P/E or prospective P/E)
Mismatching strategy
49. Residual income after the forecast horizon.
Tangible assets
Decentralized risk management
Continuing residual income
Justified price multiple (or warranted price multiple or intrinsic price multiple)
50. The present discounted value of future cash flows: For assets - the present dis-counted value of the future net cash inflows that the asset is expected to generate; for liabilities - the present discounted value of the future net cash outflows that a
Leading dividend yield
Expenses
Tobin's q
Present value (PV)