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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. The part of the execution step of the portfolio manage-ment process in which investment strategies are integrated with expectations to select a portfolio of assets.
Liquidity discount
Portfolio selection/composition problem
Economies of scale
Adjusted R2
2. A forward contract in which the underlying is a bond.
Fixed-income forward
Weighted harmonic mean
Expenses
Equity charge
3. A stage of growth in which a company typically enjoys rapidly expanding markets - high profit margins - and an abnormally high growth rate in earnings per share.
Acquisition method
Commodity futures
Growth phase
Supernormal growth
4. The value that investors forgo by choosing a particular course of action; the value of something in its best alternative use.
Discounted cash flow analysis
Bull spread
Active strategy
Opportunity cost
5. Hirschman Index A measure of rna ket concentration that is calculated by summing the squared mar et shares for competing companies in an industry; high HHI readings or mergers that would result in large HHI increases are more likely to result in regu
Market value of invested capital
Financial transaction
Pyramiding
Her rmdahl-
6. Businesses with high sensitivity to business- or industry-cycle influences.
Reporting unit
Cyclical businesses
Nonparametric test
Information ratio (IR)
7. The differential of infor-mation between corporate insiders and outsiders regarding the company's performance and prospects. Managers typically have more informa-tion about the company's performance and prospects than owners and creditors.
synunetric information
Joint probability
Rule of 70
Return on common equity (ROCE)
8. Common-size analysis thatinvolves comparing a specific financial statementwith that statement in prior or future time peri-ods; also - cross-sectional analysis of one companywith another.
Statistically significant
Performance appraisal
Percentiles
Horizontal analysis
9. A present value model of stock value that views the intrinsic value of a stock as present value of the stock's expected future dividends.
Interest rate call
Probability
Floating-rate loan
Dividend discount model (DDM)
10. A portfolio having factor sensitiv-ities that are matched to those of a benchmark or other portfolio.
Shortfall risk
Tracking portfolio
Delta
Horizontal merger
11. A market index portfolio.
Passive portfolio
Capitalization rate
Equity options
Cost approach to value
12. A graphical depic-tion of a company's investment opportunities ordered from highest to lowest expected return. A company's optimal capital budget is found where the investment opportunity schedule inter-sects with the company's marginal cost of capit
Independent variable
Provision
Investment opportunity schedule
Benchmark
13. The autocorrelation of the error term.
Purchase method
Error autocorrelation
Current exchange rate
Market value of invested capital
14. An option strategy involving the purchase of a put and sale of a call in which the holder of an asset gains protection below a certain level - the exercise price of the put - and pays for it by giving up gains above a certain level - the exercise pri
Long-term liability
Collar
Purchasing power loss
Covered call
15. 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
Infant-industry argument
Monetary assets and liabilities
Descriptive statistics
Horizontal analysis
16. A swap in which the floating payments have a lower limit.
Account
Standard cost
Differential expectations
Floored swap
17. The difference between inventory reported as FIFO and 'nventory reported as LIFO (FIFO inventory value less LIFO inventory val e).
Simulation trial
Out-of-sample test
Diluted shares
LIFO reserve
18. 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
Indexing
Present (price) value of a basis point (PVBP)
Call
Tax expense
19. With reference to statistical infer-ence - the subdivision dealing with the testing ofhypotheses about one or more populations.
Hypothesis testing
Annuity
Operations risk or operational risk
Historical cost
20. To sell the assets of a company - division - or subsidiary piecemeal - typically because of bank-ruptcy; the form of bankruptcy that allows for the orderly satisfaction of creditors' claims after which the company ceases to exist.
Covariance matrix
Net book value
Liquidation
Net liability balance sheet exposure
21. An equation describing the expected return on any asset (or portfolio) as a linear function of its beta relative to the market portfolio.
Monte
Tender offer
Capital asset pricing model (CAPM)
Unbiasedness
22. An objective measure of the quality and safety of a company's debt based upon an analysis of the company's ability to pay the prom-ised cash flows - as well as an analysis of any indentures.
Modal interval
Brokerage
Debt ratings
Pairs arbitrage trade
23. A merger or acquisition that is to be paid for with cash; the cash for the merger might come from the acquiring company's existing assets or from a debt issue.
Cash o£ fering
Valuation ratios
Pseudo-random numbers
Expiration date
24. A measure of dispersion relat-ing to a population - calculated as the mean of the squared deviations around the population mean.
Population variance
Arbitrage portfolio
Present (price) value of a basis point (PVBP)
Strangle
25. Time thought of as advancing in extremely small increments.
Continuous time
Crawling peg
Orderly liquidation value
Nonmonetary assets and liabilities
26. The competitive strategy of seeking a compet-itive advantage within a target segment or seg-ments of the industry - either on the basis of cost leadership (cost focus) or differen tiation (differ-entiation focus) .
Focus
Terminal value of the stock (or continuing value of the stock)
Automated Clearing House
Component cost of capital
27. European option An option contract that can only be exercised on its expiration date.
Before-tax cash flow
Centralized risk management or companywide risk management
European-style option or
Expenses
28. In the context of inventory management - the need for inventory as part of the routine production-sales cycle.
Multi-step format
Normal distribution
Transactions motive
Comprehensive income
29. A system that allows individual units within an organization to manage risk. Decentralization results in duplication ofeffort but has the advantage of having people closer to the risk be more d irectly involved in its management.
Official settlements account
Vertical merger
Decentralized risk management
Type I error
30. An approach to using price multiples that relates a price multiple to forecasts of fundamentals through a discounted cash flow model.
Method based on forecasted fundamentals
Caplet
Arrears swap
Discrete random variable
31. A specifi-cation of how 'value' is to be understood in the context of a specific valuation.
Definition of value (or standard of value)
Money-weighted rate of return
Cointegrated
Forward integration
32. Agreements made by a company in bankruptcy under which a company's capital struc-ture is altered and/ or alternative arrangements are made for debt repayment; U.S. Chapter II bankruptcy. The company emerges from bank-ruptcyas a going concern.
Reorganization
North
Long-lived assets (or long-term assets)
European-style option or
33. Linear regression involv-ing two or more independent variables.
Residual dividend approach
Point of sale
Multiple linear regression
Synthetic put
34. Controlling additional property throughreinvestment - refinancing - and exchanging.
Annual percentage rate
Ordinary annuity
Pyramiding
Real GDP per person
35. A trend in which the dependent vari-able changes at a constant rate with time.
Vested benefit obligation
Linear trend
Qualitative dependent variables
Short
36. The standard deviation of the differ-ence in returns between an active investment portfolio and its benchmark portfolio; also called tracking error volatility - tracking risk - and active risk.
Fundamental factor models
Defensive interval ratio
Regime
Tracking error
37. 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.
Synthetic forward contract
Active portfolio
Gamma
synunetric information
38. An annuity with a first cash flow that is paid one period from the present.
Conditional expected value
Transactions motive
Ordinary annuity
Spearman rank correlation coefficient
39. A record of foreign investment in a country minus its investment abroad.
Frequency distribution
Leading
Capital account
Cost of debt
40. A descriptive measure computed from or used to describe a population of data - convention-ally represented by Greek letters.
Tax base (tax basis)
Parameter
Nonconventional cash flow
Logit model
41. A country that during its entire his-tory has borrowed more in the rest of the world than other countries have lent in it.
Account format
Growth option or expansion option
Tax loss carry forward
Debtor nation
42. Shares that were issued and subse-quently repurchased by the company.
Bayes' formula
Venturers
Treasury shares
Tax risk
43. A test that is not concerned with a parameter - or that makes minimal assumptions about the population from which a sam Ie comes.
Nonparametric test
Standardizing
Theta
Company share-related factors
44. The market price of an asset or lia-bility that trades regularly.
Type I error
NTM P/E
Total probability rule for expected value
Fair market value
45. A series of put options on an interest rate - with each option expiring at the date on which the floating loan rate will be reset - and with each option having the same exercise rate. A floor in general can have an underlying other than the interest
Minority active investments
Out-of-sample forecast errors
Securities offering
Interest rate floor or floor
46. A synonym for robust standard errors.
Volatility
Capital charge
Gross profit (gross margin)
White-corrected standard errors
47. An inventory accounting method in which the sales value of an item is reduced by the gross margin to calculate the item's cost.
Special purpose entity (special purpose vehicle or variable interest entity)
Lockbox system
Retail method
Debt ratings
48. A pre-offer takeover defense mechanism that makes it prohibitively costly for an acquirer to take control of a target without the prior approval of the target's board of directors.
Market risk
Poison pill
Tax expense
Credit derivatives
49. The company's total cost of capital in money terms.
Growth investors
Installment
Standardized unexpected earnings (SUE)
Capital charge
50. An ordered listing.
Permutation
Mode
Descriptive statistics
Random number generator