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Test your basic knowledge |
CFA Level2 Vocab
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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 probability based on logical analysis rather than on observation or personal judgment.
A priori probability
Unearned fees
Economic growth rate
Bond equivalent yield
2. All changes in equity other than contributions by - and distributions to - own-ers; income under clean surplus accounting; includes all changes in equity during a period except those resulting from investments by own-ers and distributions to owners;
Technical indicators
Comprehensive income
Cost of carry model
Free cash flow to equity model
3. The rate of return from a cash-and-carry transaction implied by the futures price relative to the spot price.
Equity forward
Information ratio (IR)
Implied repo rate
Share-the-gains - share-the-pains theory
4. Aka 'Residual income. '
Economic profit
Equilibrium
Risk-neutral valuation
Pairs arbitrage
5. A trader who typically holds posi-tions open overnight.
Position trader
Cash-generating unit
U.S. interest rate differential
Static trade-off theory of capital structure
6. FIrm The cash flow available to the company's suppliers of capital after all operat-ing expenses (including taxes) have been paid and necessary investments in working and fixed capital have been made.
Free cash flow to the
Swap spread
Days of sales outstanding (DSO)
Clearinghouse
7. Probabilities reflecting beliefs prior to the arrival of new information.
Disbursement float
Harmonic mean
Nonconventional cash flow
Prior probabilities
8. An amount or percentage deducted from the value of an owner-ship interest to reflect the relative absence ofmarketability.
A priori probability
Flotation cost
Stated rate (nominal rate or coupon rate)
Discount for lack of marketability
9. The risk that govern-mental laws and regulations directly or indirectly affecting a company's operations will change with potentially severe adverse effects on the com-pany's continued profitabiliny and even its long-term sustainability.
Cointegrated
Debit
Legislative and regulatory risk
Expensed
10. 1) A contract on an interest rate - whereby at periodic payment dates - the writer of the cap pays the difference between the market interest rate and a specified cap rate if - and only if - this differ-ence is positive. This is equivalent to a strea
Entry price
Sector rotation strategy
Proxy fight
Cap
11. 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.
Pull on liquidity
Percentage-of-completion
Uniting of interests method
Rent seeking
12. With reference to the presen-tation of expenses in an income statement - the grouping together of expenses serving the same function - e.g. - all items that are costs of good sold.
Nonearning assets
Arrears swap
Single-step format
Grouping by function
13. An agreement between two governments in which the government of the exporting country agrees to restrain the volume of its own exports.
Measure of location
Discount for lack of control
Common-size analysis
Voluntary export restraint
14. Next twelve months P/E: current market price divided by an estimated next twelve months EPS.
Controlling interest
Equity method
Diminishing balance method
NTM P/E
15. The portfolio with the each given level of minimum variance for expected return.
Decentralized risk management
Day trader
Bargain purchase
Minimum-variance portfolio
16. With reference to equity investors - investors who are focused on paying a relatively low share price in relation to earnings or assets per share.
Value investors
Default risk premium
Holding period yield (HPy)
Heteroskedasticity-consistent standard errors
17. The preference some investors have for shares that exhibit certain characteristics.
Nominal scale
Out-of-the-money
Special purpose entity (special purpose vehicle or variable interest entity)
Clientele effect
18. An ordered listing.
Valuation allowance
Permutation
Holding period yield (HPy)
Purchase method
19. A theory of regulatory behavior that holds that regulators must take account of the demands of three groups: legislators - who established and oversee the regulatory agency; firms in the regulated industry; and consumers of the regulated indus-try's
Mutually exclusive events
Covered call
Receiver swaption
Share-the-gains - share-the-pains theory
20. The earnings per share that a busi-ness could achieve currently under mid-cyclical conditions.
Quantile (or fractile)
Financial distress
Imports
Normalized earnings per share (or normal earnings per share)
21. An extra return that compensates investors for the increased sensitivity of the mar-ket value of debt to a change in market interest rates as maturity is extended.
Capitalization rate
Positive serial correlation
Maturity premium
Bayes' formula
22. Assets less liabilities; the residual interest in the assets after subtracting the liabilities.
Degree of operating leverage (DOL)
Equity
Commodity forward
Securities Exchange Act of 1934
23. A loan in which the borrower receives a sum of money at the start and pays back the entire amount with interest in a single pay-ment at maturity.
Single-payment loan
Reverse stock split
Long-lived assets (or long-term assets)
Portfolio possibilities curve
24. In the fixed income markets - to price a security on the basis of valuation-relevant char-acteristics (e.g. - debt-rating approach).
Fair market value
Matrix pricing
Partnership
Put-call parity
25. The status of a company in the sense of whether it is assumed to be a going con-cern or not.
Current taxes payable
Normalized earnings
Deductible temporary differences
Premise of value
26. The risk that a company will suffer an extended diminution in market value relative to other companies in the same industry due to a demonstrated lack of concern for environmental - social - and governance risk factors.
Reputational risk
Scalper
Platykurtic
Correlation analysis
27. The process of using an option to buy or sell the underlying.
Return on assets (ROA)
Total return swap
Direct debit program
Exercise or exercising the option
28. A solvency ratio calculated as total debt divided by total debt plus total share-holders ' equi ty.
Systematic factors
Current exchange rate
Operating cycle
Debt-to-capital ratio
29. With the accounting systems - a formal record of increases and decreases in a specific asset - liability - component of owners' equity - rev-enue - or expense.
Value
Synthetic forward contract
Account
Quick assets
30. A yield on a basis comparable to the quoted yield on an interest-bearing money market instrument that pays interest on a 360-<iay basis; the annualized holding period yield - assuming a 360-<iay year.
Bootstrapping earnings
Historical cost
Money market yield (or CD equivalent yield
Mesokurtic
31. The number of units produced and sold at which the company's net income is zero (revenues = total costs).
Forward price or forward rate
Breakeven point
Controlling interest
Capital allocation line (CAL)
32. The nonmonetary return offered by an asset when the asset is in short supply - often associated with assets with seasonal production processes.
Convenience yield
Split-off
Chain rule of forecasting
Efficient portfolio
33. Regression that models the straight-line relationship between the dependent and independen t variable (s) .
Financial distress
Inflation premium
Trimmed mean
Linear regression
34. A random variable hav-ing the outcomes 0 and 1.
Bernoulli random variable
Joint venture
Target semivariance
Designated fair value instruments
35. Under U.S. GAAP - a measure used in estimating a defined-benefit pen-sion plan's liabilities - defined as 'the actuarial present value as of a date of all benefits attributed by the pension benefit formula to employee ser-vice rendered prior to that
Discount
synunetric information
Projected benefit obligation
Friendly transaction
36. Activities which are associated with the acquisition and disposal of property - plant - and equipment; intangible assets; other long-term assets; and both long-term and short-term investments in the equity and debt (bonds and loans) issued by other c
Committed lines of credit
Multiple linear regression
Investing activities
Cash flow additivity principle
37. An option strategy involving the purchase of two calls and one put.
Binomial model
Strap
Regulatory risk
Traditional efficient markets formulation
38. Temporary differ-ences that result in a red uction of or deduction from taxal:J e income in a future period when the balance sheet item is n~ covered or settled.
Book value of equity (or book value)
Orderly liquidation value
Deductible temporary differences
Incremental cash flow
39. Cannibalization occurs when an investment takes customers and sales away from another part of the company.
Cannibalization
Indirect format (indirect method)
Break point
Mature phase
40. Under U.S. GAAP - a measure used in estimating a defined-benefit pen-sion plan's liabilities - defined as 'the actuarial present value of benefits (whether vested or non-vested) attributed by the pension benefit formula to employee service rendered b
Common size statements
Theta
Accumulated benefit obligation
Periodic rate
41. The process of valuing long-lived assets at fair value - rather than at cost less accumulated depreciation. Any resulting profit or loss is either reported on the income statement and/or through equity under revaluation surplus.
Receiver swaption
Value at risk (VAR)
Treasury stock method
Revaluation
42. A procedure of selecting every kth member until reaching a sample of the desired size. The sample that results from this procedure should be approximately random.
Margin
Centralized risk management or companywide risk management
Systematic sampling
Earnings per share
43. Describes a time series whenits expected value and variance are cons tan t andfinite in all periods and when its covariance withitself for a fixed number of periods in the past orfuture is constant and finite in all periods.
Expanded
Trimmed mean
Covariance stationary
Controlling interest
44. The number of units pro-duced and sold at which the company's operating profit is zero (revenues = operating costs).
If-converted method
Interest rate floor or floor
Operating breakeven
Risk budgeting
45. A depreciation method tHat allocates the cost of a long-lived asset based on-actual usage during the period .
Units-of-production method
Maintenance margin requirement
Segment turnover
Fair value
46. 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.
ecurity market line (SML)
Terminal price multiple
Rate of return
Structured note
47. Debt (fixed-income) securities that a company intends to hold to matu-rity; these are presented at their original cost - updated for any amortization of discounts or pr.emiums.
Held-to-maturity investments
Null hypothesis
Bond yield plus risk premium approach
In-process research and development
48. For data grouped into intervals - the fraction of total observations that are less than the value of the upper limit of a stated interval.
Intangible assets
Parameter
Cumulative relative frequency
Arbitrage portfolio
49. A factor related to the econ-omy - such as the inflation rate - industrial produc-tion - or economic sector membership. acroeconomic factor model A multifac tor model in which the factors are surprises in macroeco-nomic variables that significan tly
Macroeconomic factor
Conventional cash flow
Overall capitalization rate
Guideline public company method
50. The process of allocating the cost of intangible long-term assets having a finite useful life to accounting periods; the allocation of the amount of a bond premium or discount to the periods remaining until bond maturity.
Present (price) value of a basis point (PVBP)
Default risk premium
Root mean square(l er ror (RMSE)
Amortization