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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.
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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 swaption that allows the holder to enter into a swap as the fixed-rate receiver and floating-rate payer.
Local currency
Balance of payments accounts
Subsistence real wage rate
Receiver swaption
2. The capital structure at which the value of the company is maximized.
Moneyness
Optimal capital structure
Dynamic hedging
Sampling distribution
3. The currency of the primary economic environment in which an entity operates.
Functional currency
Proportionate consolidation
Direct income capitalization approach
Centralized risk management or companywide risk management
4. The property of having a non-constant variance; refers to an error term with the property that its variance differs across observations.
If-converted method
Heteroskedasticity
No-growth company
Working capital management
5. 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.
Bond equivalent yield
Captive rmance subsidiary
Single-payment loan
Cash flow statement (statement of cash flows)
6. An option strategy that combines a bull spread and a bear spread having two differentexercise prices - which produces a risk-free payoffof the difference in the exercise prices.
Simulation
Box spread
Recapture premium
Infant-industry argument
7. The particular value calculated from sam-ple observations using an estimator.
Consolidation
Grouping by function
Estimate
Present value of growth opportunities (or value of growth)
8. Financial ratios involving bal-ance sheet items only.
Multi-step format
Tree diagram
Financial analysis
Balance sheet ratios
9. An option strategy that involves selling a put with a lower exercise price and buying a put with a higher exercise price. It can also be exe-cuted with calls.
Cash ratio
Bear spread
Hedging
Tariff
10. Unsecured short-term corporate debt that is characterized by a single payment at maturity.
Commercial paper
New growth theory
Synthetic put
Degree of confidence
11. The ratio of a set of observations' standard deviation to the observa-tions' mean value.
Greenmail
Coefficient of variation (CV)
Collar
Population
12. The preference some investors have for shares that exhibit certain characteristics.
Clientele effect
Direct debit program
Neoclassical growth theory
P Value
13. A liquidi ty ratio calculated as (cash + short-term marketable investments) divided by current liabilities; measures a company's ability to meet its current obligations with just the cash and cash equivalents on hand.
Rule of 72
Complement
Robust
Cash ratio
14. An aggregate of an entity's income tax payable (or recoverable in the case of a tax benefit) and any changes in deferred tax assets and liabili-ties. It is essentially the income tax payable or recoverable if these had been determined based on accoun
Unconditional heteroskedasticity
Tax expense
Payoff
FIFO method
15. Present obligations of an enterprise aris-ing from past events - the settlement of which is expected to result in an outflow of resources embodying economic benefits; creditors' claims on the resources of a company.
Hypothesis testing
Credit analysis
Harmonic mean
Liabilities
16. The graph of the capital asset pricing model.
Discount for lack of marketability
Bond yield plus risk premium approach
Macaulay duration
ecurity market line (SML)
17. A swap in which the underlying is a commodity such as oil - gold - or an agricultural product.
Commodity swap
Mean
Paired observations
Sector neutralizing
18. The difference between revenue and expenses; what remains after subtracting all expenses (including depreciation - interest - and taxes) from revenue.
U.S. interest rate differential
Direct income capitalization approach
Net income (loss)
Economic order quantity-reorder point
19. Standard errors of the esti-mated parameters of a regression that correct for the presence of heteroskedastici ty in the regres-sion's error te
Robust standard errors
Multivariate distribution
Expected value
Root mean square(l er ror (RMSE)
20. With reference to time-series mod-els - a model in which the growth rate of the time series as a function of time is constant.
Log-linear model
Net lender
Safety stock
Down transition probability
21. A two-dimensional plot of pairs of obser-vations on two data series.
Diminishing balance method
Scatter plot
Installment
Market share test
22. A trader who offers to buy or sell futures contracts - holding the position for only a brief period of time. Scalpers attempt to profit by buy-ing at the bid price and selling at the higher ask price.
Financial risk
Illiquidity discount
Other receivables
Scalper
23. An equation expressing the equiva-lence (parity) of a portfolio of a call and a bondwith a portfolio of a put and the underlying -which leads to the relationship between put andcall prices
Strap
Put-call parity
Operations risk or operational risk
Economic profit
24. In the context of the weighted average cost of capital (WACC) - a break point is the amount of capital at which the cost of one or more of the sources of capital changes - leading to a change in the WACC.
Flotation cost
Bottom-up investing
Break point
Net operating cycle
25. The strategy a company fol-lows with regard to the amount and timing of div-idend payments.
Complement
Number of days of payables
Dividend payout policy
Pet projects
26. Increases in economic benefits in the form of inflows or enhancements of assets - or decreases of liabilities that result in an increase in equity (other than increases resulting from contribu-tions by owners) .
Income
Direct debit program
Efficient portfolio
Shark repellents
27. A method of presentation of accounting transactions in which effects on assets appear at the left and effects on liabilities and equity appear at the right of a central dividing line; also known as T-account format.
Lower bound
Long
Account format
Floating-rate loan
28. An act passed by the U.S. Con-gress in 1933 that specifies the financial and other significant information that investors must receive when securities are sold - prohibits misrepresenta-tions - and requires initial registration of all public issuance
Securities offering
Sector neutralizing
Securities Act of 1933
Corporation
29. A profitability ratio calculated as earnings before taxes divided by revenue.
Pretax margin
Factor sensitivity (also factor betas or factor loadings)
Semivariance
Net book value
30. The P/E to-growth ratio - calculated as the stock's PI E divided by the expected earnings growth rate.
PEG
Type II error
Equity charge
Impairment
31. A result in statistics that states that the sample mean computed from large sam-ples of size n from a population with finite vari-ance will follow an approximate normal distribution with a mean equal to the population mean and a variance equal to the
Central limit theorem
Breakup value or private market value
Agency costs
Yield to maturity
32. A merger in which the company being purchased becomes a subsidiary of the purchaser.
Completed contract
Company fundamental factors
Current cost
Subsidiary merger
33. 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
Discounted cash flow analysis
Yield spread
Closeout netting
Static trade-off theory of capital structure
34. Analysis that shows the changes in key financial quantities that result from given (economic) events - such as the loss of customers - the loss of a supply source - or a catastrophic event; a risk management technique involving examina-tion of the pe
Classical growth theory
Scenario analysis
No-growth value per share
Mixed offering
35. A fUl !lction giving the probability of joint occurrences of values of stated random variables.
J oint probability function
Trust receipt arrangement
Entry price
Tender offer
36. The return that an investorearns during a specified holding period; a syn-onym for total return.
Efficient portfolio
Screening
Holding period return
Fiduciary call
37. A quantitative measure of skew (lack of symmetry); a synonym of skew.
Skewness
Relative frequency
Accounting estimates
Cash ratio
38. Costs associated with the conflict of interest present when a company is managed by non-owners. Agency costs result from the inher-ent conflicts of interest between managers and equity owners.
Standard cost
Out-of-sample forecast errors
Payment date
Agency costs
39. An offset to revenue reflecting any cash refunds - credits on account - and discounts from sales prices given to cus-tomers who purchased defective or unsatisfactory items.
Closeout netting
Free cash flow to the
Qualifying special purpose entities
Sales returns and allowances
40. A financial statement that provides information about a company's prof-itability over a stated period of time.
Income statement (statement of operations or profit and loss statement)
Sales returns and allowances
Segment turnover
Convenience yield
41. A measurement scale that has all the characteristics of interval measurement scales as well as a true zero point as the origin.
Ratio scales
Expanded
Bill-and-hold basis
Error autocorrelation
42. An agreement between two governments in which the government of the exporting country agrees to restrain the volume of its own exports.
Grouping by function
Voluntary export restraint
Full price
Surprise
43. An annuity having a first cash flow that is paid immediately.
Annuity due
Financial reporting quality
Long-term contract
Nonearning assets
44. An agreement between two parties to exchange a series of future cash flows.
Coefficient of variation (CV)
Swap
Accrued expenses (accrued liabilities)
Cash flow at risk (CFAR)
45. As used in option pricing - the standard deviation of the continuously compounded returns on the underlying asset.
Independent projects
Hypothesis
Volatility
Joint venture
46. Assets and liabilities with value equal to the amount of currency con-tracted for - a fixed amount of currency. Examples are cash - accounts receivable - mortgages receiv-able - accounts payable - bonds payable - and mort-gages payable. Inventory is
Regulatory risk
Absolute valuation model
Monetary assets and liabilities
Noncurrent
47. A function giving the probability that a random variable is less than or equal to a specified value.
Segment margin
Perfect collinearity
Opportunity cost
Cumulative distribution function
48. An approach to valuation that involves using a price multiple to evaluate whether an asset is relatively fairly valued - rela-tively undervalued - or relatively overvalued when compared to a benchmark value of the multiple.
Statutory merger
Tracking risk
Method of comparables
Creditor nation
49. Netting the market values of all contracts - not just derivatives - between parties.
Cross-product netting
Free cash flow
Joint venture
Income statement (statement of operations or profit and loss statement)
50. The absorption of one company by another; two companies become one entity and one or both of the pre-merger companies ceases to exist as a separate entity.
Asset retirement obligations (AROs)
Swap spread
Forward contract
Merger