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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. With reference to a random vari-able - the property of having characteristics such as mean and variance that are not constant through time.






2. A legal restriction that dividends cannot exceed retained earnings.






3. A procedure for determining the interest on a loan or bond in which the interest is deducted from the face value in advance.






4. 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






5. 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.






6. A profitability ratio calcu-lated as net income divided by average sharehold-ers' equity.






7. Private equity investors in development-stage companies.






8. 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.






9. An annualized return that accounts for the effect of interest on interest; EAY is computed by compounding 1 plus the holding period yield forward to one year - then subtracting 1.






10. Income rate that reflects the relationship between equity income and equity capital.






11. In reference to short-term cash management - it is an investment strategy charac-terized by simple decision rules for making daily investments.






12. An estimation formula; the formula used to compute the sample mean and other sample statistics are examples of estimators.






13. A liability account for money that has been collected for goods or services that have not yet been delivered; payment received in advance of providing a good or servIce.






14. The number of indepen-dent observations used.






15. The management of a company's short-term assets (such as inventory) and short-term liabilities (such as money owed to suppliers) .






16. Describes two time series that have a long-term financial or economic relationship such that they do not diverge from each other without bound in the long run.






17. A si gle numerical estimate of an unknown quantity - such as a population parameter.






18. A random variable for which the range of possible outcomes is the real line (all real numbers between (-00 and +(0) or some subset of the real line.






19. An approach to using price multiples that relates a price multiple to forecasts of fundamentals through a discounted cash flow model.






20. The mix of debt and equity that a company uses to finance its business; a company's specific mixture of long-term financing.






21. Net operating income less debt service and less taxes payable on income from operations.






22. An option strategy in which a long position in a certain number of options is offset by a short position in a certain number of other options on the same underlying - resulting in a risk-free position.






23. With reference to portfolio strategies - the application of a strategy's portfolio selection rules to historical data to assess what would have been the strategy's historical performance.






24. An experiment that can produce one of two outcomes.






25. The probability that an asset's value moves down in a model of asset price dynamics.






26. Investments in which the investor has no signifi-cant influence or control over the operations of the investee.






27. A calculation of yield that is annualized using the ratio of 365 to the number of days to maturity. Bond equivalent yield allows for the restatement and comparison of securities with different compounding periods.






28. A sample measure of the degree of a distribution's peakedness in excess of the normal distribution's peakedness.






29. Market makers that buy and sell by quoting a bid and an ask price. They are the primary providers ofliquidity to the market.






30. The amount for which one can sell some-thing - or the amount one must pay to acquire something.






31. Said of a por tfolio for which eco-nomic sectors are represented in the same pro-portions as in the benchmark - using market-value weights.






32. An option that allows the holder to buy (if a call) or sell (if a put) an underlying cur-rency at a fixed exercise rate - expressed as an exchange rate.






33. The square root of the average squared forecast error; used to compare the out-of-sample forecasting perfor-mance of forecasting models.






34. The smaller the stake that managers have in the company - the less is their share in bearing the cost of excessive perquisite consumption or not giving their best efforts in running the company.






35. The ability to terminate a proj-ect at some future time if the financial results are disappointing.






36. 1) The simultaneous purchase of an undervalued asset or portfolio and sale of an over-valued but equivalent asset or portfolio - in order to obtain a riskless profit on the price differential. Taking advantage of a market inefficiency in a risk-free






37. The value of the U.S. dollar expressed in units of foreign currency per U.S. dollar.






38. In probability - with reference to an event 5 - the event that 5 does not occur; in eco-nomics - a good that is used in conjunction with another good.






39. The setting of overall policies and standards in risk management






40. A varia-tion ofVAR that reflects credit risk.






41. Arrangements that do not result in additional liabilities on the balance sheet but nonetheless create economic obligations.






42. A feature of futures markets in which futures prices provide valuable information about the price of the underlying asset.






43. A measure of th e yield on the undel~ ing bond of a futures contract implied by pricing it as though the underlying will be delivered at the futures expiration.






44. A ratio of an ending price over a beginning price; it is equal to 1 plus the holding period return on the asset.






45. A method for estimating the betafor a company or project; it requires using a com-parable company's beta and adjusting it for finan-cialleverage differences.






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






47. A cost that has already been incurred.






48. The quality of being relatively unaffected by a violation of assumptions.






49. Outflows of economic resources or increases in liabilities that result in decreases in equity (other than decreases because of distribu-tions to owners); reductions in net assets associ-ated with the creation of revenues.






50. The percentage of total earnings paid out in dividends in any given year (in per-share terms - DPS/ EPS).






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