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Test your basic knowledge |
CFA Level2 Vocab
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Subjects
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
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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 stage of growth in which the com-pany reaches an equilibrium in which investment opportunities on average just earn their opportu-nity cost of capital.
Rate-of-return regulation
Price to book value
Mature phase
Asset-based valuation
2. A feature of futures markets in which futures prices provide valuable information about the price of the underlying asset.
Credit analysis
Price discovery
Pull on liquidity
Log-log regression model
3. 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.
Lemons problem
Central limit theorem
Bond equivalent yield
Labor productivity
4. The study of how data can besummarized effectively.
Dummy variable
Clearinghouse
Descriptive statistics
Mutually exclusive projects
5. 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
Specific identification method
Tobin's q
Robust standard errors
Overnight index swap (OIS)
6. The volatility that option traders use to price an option - implied by the price of the option and a particulau option-pricing model.
Futures exchange
Implied volatility
Decision rule
Gross domestic product
7. A dividend payout pol-icy under which earnings in excess of the funds necessary to finance the equity portion of com-pany's capital budget are paid out in dividends.
Initial public offering (IPO)
Working capital
Designated fair value instruments
Residual dividend approach
8. The combination of the underlying - puts - calls - and risk-free bonds that replicates a forward contract.
Independent projects
Statement of retained earnings
Mutually exclusive projects
Synthetic forward contract
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.
Population mean
Posterior probability
Effective annual yield (EAY)
Rule of 70
10. A record of the change in official reserves - which are the government's holdings offoreign currency.
Definitive merger agreement
Official settlements account
Dealing securities
Trimmed mean
11. A forecasting approach that involves moving from international and national macroeconomic forecasts to industry forecasts and then to individual company and asset forecasts.
Tax base (tax basis)
Bank discount basis
Net realizable value
Top-down forecasting approach
12. With reference to regression - the set of variables included in the regression and the regression equation's functional form.
Model specification
Pairs arbitrage trade
Accounting estimates
Hedge ratio
13. The most frequently occurring value in a set of observations.
Mode
Transaction exposure
Operating activities
Longitudinal data
14. 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
Share-the-gains - share-the-pains theory
Total probability rule for expected value
Ex-dividend date
Brokerage
15. The probability of the joint occur-rence of stated even ts.
Convenience yield
Dilution
Joint probability
Cost-of-service regulation
16. The ratio of cash dividends paid to earnings for a period.
Dividend payout ratio
Sell-side analysts
Scalper
Compounding
17. A specifi-cation of how 'value' is to be understood in the context of a specific valuation.
Dispersion
Absolute dispersion
Definition of value (or standard of value)
Cross-product netting
18. The day that options are granted to employees; usually the date that compensation expense is measured if both the number of shares and option price are known.
Continuous time
Grant date
Analysis of variance (ANOVA)
Stock purchase
19. Regression that models the straight-line relationship between the dependent and independen t variable (s) .
Winner's curse
Linear regression
Completed contract
Stated rate (nominal rate or coupon rate)
20. The ability to react and adapt to financial adversities and opportunities.
Inventory blanket lien
Accounting risk
Sunk cost
Financial flexibility
21. The risk of loss from failures in a company's systems and proce-dures (for example - due to computer failures or human failures) or events completely outside of the control of organizations (which would include 'acts of God' and terrorist actions) .
Operations risk or operational risk
Rule of 72
Net revenue
Out-of-sample test
22. An option strategy involving the purchase of two puts and one call.
Creditor nation
Bundling
Strip
Contribution margin
23. A merger or acquisition that is to be paid for with cash - securities - or some combina-tion of the two.
Analysis of variance (ANOVA)
Safety stock
Mixed offering
Long-term contract
24. Financial instru-ments that an entity chooses to measure at fairvalue per lAS 39 or SFAS 159. Generally - the elec-tion to use the fair value option is irrevocable.
Profitability ratios
Ratio scales
Designated fair value instruments
Fixed charge coverage
25. The difference between the fixed rate on an interest rate swap and the rate on a Trea-sury note with equivalent maturity; it reflects the general level of credit risk in the market.
Trading securities (held-for-trading securities)
Swap spread
Discrete random variable
Treasury stock method
26. The owners of a joint venture. Each is active in the management and shares control of the joint venture.
Venturers
Node
Default risk premium
Credit risk or default risk
27. Long-term assets with physical sub-stance that are used in company operations - such as land (property) - plant - and equipment.
Holder-of-record date
Accounts receivable turnover
Tangible assets
Maintenance margin requirement
28. The risk that failures by company man-agers to effectively manage a company's environ-mental - social - and governance risk exposures will lead to lawsuits and other judicial remedies - resulting in potentially catastrophic losses for the company; th
Monetary assets and liabilities
Legal risk
Unconditional probability (or marginal probability)
Taxable temporary differences
29. The expected excess return on the market over the risk-free rate.
Conditional variances
Market risk premium
Arrears swap
Fundamental beta
30. The cost of debt financing to a com-pany - such as when it issues a bond or takes out abank loan.
Acquisition
Split-off
Cost of debt
Cash basis
31. The use of computer networks to conduct financial transactions electronically.
Marking to market
Electronic funds transfer
Bonding costs
Fundamentals
32. 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.
Ordinary least squares (OLS)
General Agreement on Tariffs and Trade
Free cash flow to the
Implied yield
33. An estimate of the equity risk pre-mium that is based upon estimates provided by a panel of finance experts.
Alternative hypothesis
Survey approach
Hedge ratio
Cost of debt
34. 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.
Revaluation
Percentage-of-completion
Qualifying special purpose entities
Multi-step format
35. A loan that is secured with com-panyassets.
Asset-based loan
Commodity option
Guideline public companies
Systematic sampling
36. An experiment that can produce one of two outcomes.
Surprise
Estimated (or fitted) parameters
Bernoulli trial
Accounts payable
37. The money of other countries regardless of whether that money is in the form of notes - coins - or bank deposits.
Debt-to-assets ratio
Foreign currency
Logit model
Asset beta
38. A wholly-owned sub-sidiary of a company that is established to provide financing of the sales of the parent company.
ackwardation
Captive rmance subsidiary
Gamma
Operating activities
39. A transaction in exchange-listed deriva-tive markets in which a party re-enters the market to close out a position.
Offsetting
Economic growth
Unearned fees
Broker
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
Balance sheet ratios
Committed lines of credit
Accumulated benefit obligation
Price to book value
41. The value per share of a no-growth company - equal to the expected level amount of earnings divided by the stock's req uired rate of return.
Exercise date
Down transition probability
Fair market value
No-growth value per share
42. The difference between reported earnings per share and expected earnings per share.
Bonding costs
Taxable income
Unexpected earnings (also earnings surprise)
Exchange rate
43. The market for short-term debt instruments (one-year maturity or less).
Pure discount instruments
Bank discount basis
Money market
Exercise or exercising the option
44. Deliberate activity aimed at influencing reporting earnings numbers - often with the goal of placing management in a favorable light; the opportunistic use of accruals to manage earnings.
Add-on interest
Earnings management activity
Asset-based valuation
Spin-off
45. Businesses with high sensitivity to business- or industry-cycle influences.
Settlement price
Correlation analysis
Debt covenants
Cyclical businesses
46. Not symmetrical.
Business risk
Dealing securities
Official settlements account
Skewed
47. A prof -itabili ty ratio calculated as operating income (i.e. - income before inte est and taxes) divided by revenue.
Statutory merger
Contingent consideration
Ope ating profit margin (operating margin)
Nonearning assets
48. Reward-to-volatility ratio; ratio of portfolio excess return to standard deviation.
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49. Dummy variables used as dependent variables rather than as inde-pendent variables.
Qualitative dependent variables
Discount for lack of control
Designated fair value instruments
Economic growth rate
50. Individual accounts to which an employee and typically the employer makes contributions - generally on a tax-advantaged basis. The amounts of contributions are defined at the outset - but the future value of the benefit is unknown. The employee bears
Implied volatility
Active risk squared
Commodity swap
Defined-contribution pension plans