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Test your basic knowledge |
CFA Level2 Vocab
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Study First
Subjects
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
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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 guarantee from the clear-inghouse that if one party makes money on a transaction - the clearinghouse ensures it will be paid.
Performance guarantee
Current taxes payable
Cash-flow-statement-based aggregate accruals
Poison pill
2. A linear regression model with two or more independent variables.
Expenses
Netting
Risk premium
Multiple linear regression model
3. ID) With respect to random variables - the property of ran-dom variables that are independent of each otherbut follow the identical probability distribution.
Income tax recoverable
Central limit theorem
Revenue
Independent and identically distributed (l
4. The condition in futures markets in which futures prices are higher than expected spot prices.
Normal contango
Potential credit risk
Dumping
Earnings game
5. The lowest possible value of an option.
Underlying earnings (or persistent earnings - continu-ing earnings - or core earnings)
Shortfall risk
Range
Lower bound
6. Valuation approach that values an asset as the present discounted value of the income expected from it.
Implied volatility
Centralization permits economies of scale and allows a company to use some of its risks to offset other risks.
Income approach
Storage costs or carrying costs
7. The time remaining in the life of a derivative - typically expressed in years.
Time to expiration
Payout ratio
Binomial tree
Valuation ratios
8. A trend in which the dependent vari-able changes at a constant rate with time.
Asset beta
Regulatory risk
Linear trend
Panel data
9. 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.
Unbiasedness
Probability distribution
Equity dividend rate
Currency forward
10. Earnings per share divided by price; the reciprocal of the PIE ratio.
Net realizable value
Earnings yield
Yield spread
Due diligence
11. A finance perspective on capital markets that deals with the relationship of price to intrinsic value. The traditional efficient mar-kets formulation asserts that an asset's price is the best available estimate of its intrinsic value. The rational ef
Likelibood
Skewness
Market efficiency
Nonlinear relation
12. In statistics - a desirable property of esti-mators; an efficient estimator is the unbiased esti-mator with the smallest variance among unbiased estimators of the same parameter.
Frequency polygon
Current assets - or liquid assets
U.S. GAAP and uniting of interests under IFRS
Efficiency
13. The most common type of commun-size analysis - ill which the accounts in a given period are compared to a benchmark item in that same year.
LIFO method
Vertical common-size analysis
In-sample forecast errors
Share-the-gains - share-the-pains theory
14. A floating-rate note or bond in which the coupon is adjusted to move opposite to a benchmark interest rate.
Inverse floater
Target semivariance
Caplet
Segment turnover
15. A solvency ratio calculated as EBIT divided by interest payments.
Operating breakeven
Interest coverage
Intergenerational data mining
Kurtosis
16. Research and development costs relating to projects that are not yet completed - such as have been incurred by a company that is being acquired.
Collar
In-process research and development
Account
Paired observations
17. Asset inflows not directly related to the ordi-nary activities of the business.
Gains
Proxy statement
Dependent variable
Nonstationarity
18. A swap in which the floating rate is the cumulative value of a single unit of currency invested at an overnight rate dur-ing the settlement period.
Illiquidity discount
Cost of carry model
Relative dispersion
Overnight index swap (OIS)
19. An agreement between two parties to exchange a series of future cash flows.
Linear regression
Independent variable
Common-size analysis
Swap
20. The condition in a financial mar-ket in which two equivalent financial instruments or combinations of financial instruments can sell for only one price. Equivalent to the principle that no arbitrage opportunities are possible.
Law of one price
Days of inventory on hand (DOH)
Dealing securities
Infant-industry argument
21. The difference between reported net income on an accrual basis and the cash flows from operating and investing activities.
Cash-flow-statement-based aggregate accruals
Zero-cost collar
Top-down forecasting approach
Financial futures
22. A measure of VAR equivalentto the analytical method bu t that refers to the use of delta to estimate the option's price sensitivity.
Payer swaption
Contribution margin
Delta-normal method
Strap
23. For accounting purposes - the exchange rates that existed when the assets and liabilities were initially recorded.
Pretax margin
Historical exchange rates
Rent seeking
Sandwich spread
24. The probability of an event given (conditioned on) another event.
Conditional probability
Minimum-variance portfolio
Credit swap
Partial regression coefficients or partial slope coeffi-cients
25. Investments in which the investor has no signifi-cant influence or control over the operations of the investee.
Standardized beta
Minority passive investments (passive investments)
Acquisition method
Pooled estimate
26. A sample measure of the degree of dispersion of a distribution - calculated by dividing the sum of the squared deviations from the sam-ple mean by the sample size minus 1.
Asset-based approach
Performance appraisal
Sample variance
Minority active investments
27. Valuation measures and other factors related to share price or the trading characteristics of the shares - such as earn-ings yield - dividend yield - and book-to-market value.
Company share-related factors
Accounting profit (income before taxes or pretax income)
Independent
Strap
28. A measurement scale that sorts data into categories that are ordered (ranked) with respect to some characteristic.
Trimmed mean
Ordinal scale
Pretax margin
Safety-first Rules
29. An agreement between two governments in which the government of the exporting country agrees to restrain the volume of its own exports.
Short
Convenience yield
Voluntary export restraint
American
30. Netting the market values of all derivative contracts between two parties to deter-mine one overall value owed by one party to another in the event of bankruptcy.
Operating risk
Closeout netting
Normal backwardation
Autoregressive (AR) model
31. The relationship between option price and volatility.
Spearman rank correlation coefficient
Vertical common-size analysis
Enterprise risk management
Vega
32. 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.
Implied yield
Quota
Broker
Present value model or discounted cash flow model
33. The initial issuance ofcommon stock registered for public trading by a formerly private corporation.
Initial public offering (IPO)
Portfolio performance attribution
Net operating profit less adjusted taxes - or NOPLAT
Initial margin requirement
34. A public document that provides the material facts concerning matters on which shareholders will vote.
Residual income (or economic profit or abnormal earnings)
Proxy statement
Breakup value or private market value
Unexpected earnings (also earnings surprise)
35. The set of rules used to select a sample.
Model specification
Noncurrent
Market risk
Sampling plan
36. A swaption that allows the holder to enter into a swap as the fixed-rate receiver and floating-rate payer.
Markowitz decision rule
Securities offering
Settlement date or payment date
Receiver swaption
37. Options originally created with expirations of sev-eral years.
Long-term equity anticipatory securities (LEAPS)
Empirical probability
Proportionate consolidation
Unclassified balance sheet
38. 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.
Trend
Sector neutral
Brokerage
Crawling peg
39. Income rate that reflects the relationship between equity income and equity capital.
Vesting date
Equity dividend rate
Robust
Comparative advantage
40. A market index portfolio.
Quartiles
Terminal value of the stock (or continuing value of the stock)
Frequency polygon
Passive portfolio
41. The last in - first out - method of accounting for inventory - which matches sales against the costs of items of inventory in the reverse order the items were placed in inventory (i.e. - inventory produced or acquired last are assumed to be sold firs
Sum-of-the-parts valuation
LIFO method
FIFO method
Free cash flow method
42. Debt issued with warrants that give the bondholder the right to purchase equity at prespecified terms.
Per unit contribution margin
Special purpose entity (special purpose vehicle or variable interest entity)
Debt with warrants
Financial leverage
43. A time series in which the value ofthe series in one period is the value of the series in the previous period plus an unpredictable random error.
Economic profit
Debtor nation
Single-step format
Random walk
44. Approach to trans-lating foreign currency financial statements for consolidation in which monetary assets and liabil-ities are translated at the current exchange rate. Nonmonetary assets and liabilities are translated at historical exchange rates (th
Financial flexibility
Minority passive investments (passive investments)
Monetary/nonmonetary method
Mature phase
45. The return on an asset in excess of the asset's required rate of return; the risk-adjusted return.
Alpha (or abnormal return)
Quota
Spearman rank correlation coefficient
Foreign exchange market
46. A measure of the expected annual cash flow from the operation of a real estate investment after all expenses but before taxes.
Financial leverage
Before-tax cash flow
Reputational risk
Statement of changes in shareholders' equity (state-ment of owners' equity)
47. A method of account-ing for joint ventures where the venturer's share of the assets - liabilities - income and expenses of the joint venture are combined on a line-by-line basis with similar items on the venturer's financial statements.
Organic growth
Proportionate consolidation
Growth investors
Duration
48. Cannibalization occurs when an investment takes customers and sales away from another part of the company.
Delivery
Adjusted R2
Cannibalization
Residual income method (or excess earnings method)
49. The amount to which a payment or series of payments will grow by a stated future date.
Build-up method
Future value (FV)
Relative strength (RSTR) indicators
Accounting estimates
50. The revaluation of a financial asset or liability to its current market value or fair value.
Goodwill
Conventional cash flow
Mark-ta-market
Target semivariance