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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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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. Nonconvertible - noncallable preferred stock with a specified divi-dend rate that has a claim on earnings senior to the claim of common stock - and no maturity date.
Gains
Credit VAR - default VAR - or credit at risk
Fixed-rate perpetual preferred stock
In-process research and development
2. 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
Regime
Tracking portfolio
Log-linear model
3. The amount at which an asset or liability is valued for tax purposes.
Breakup value or private market value
Regime
Tax base (tax basis)
Leverage
4. With respect to hypothesis testing - the rule according to which the null hypothesis will be rejected or not rejected; involves the compari-son of the test statistic to rejection point(s).
Discount for lack of control
Solvency
Going-concern assumption
Decision rule
5. The risk associated with interest rates - exchange rates - and equity prices.
Price to book value
Accounts payable
Block
Market risk
6. The condition in futures markets in which futures prices are lower than expected spot prices.
Normal backwardation
Nominal exchange rate
Type II error
Pecking order theory
7. The difference between the observed value of a statistic and the quantity it is intended to estimate.
Exposure to foreign exchange risk
Sharpe's measure
Ordinary annuity
Sampling error
8. An activity ratio equal to the number of days in the period divided by inventory turnover over the period.
Days of inventory on hand (DOH)
Cash-flow-statement-based accruals ratio
Up transition probability
Mean absolute deviation
9. A si gle numerical estimate of an unknown quantity - such as a population parameter.
World Trade Organization
Credit scoring model
Dependent variable
Point estimate
10. A random variable hav-ing the outcomes 0 and 1.
Recapture premium
Bernoulli random variable
Mesokurtic
Dynamic hedging
11. A business's value under a going-concern assumption.
Cash-flow-statement-based accruals ratio
Financial flexibility
Independent
Going-concern value
12. A feature of futures markets in which futures prices provide valuable information about the price of the underlying asset.
Degree of operating leverage (DOL)
Brokerage
Price discovery
Cash-generating unit
13. A strategic corporate goal repre-senting the long-term proportion of earnings that the company intends to distribute to shareholders as dividends.
Target payout ratio
Survey approach
Objective probabilities
Bull spread
14. Is Derivatives in which the payoffs occur if a specific event occurs; generally referred to as options.
Multivariate distribution
Contingent clain
Risk-neutral valuation
Short
15. A type of weighted mean computed by averaging the reciprocals of the ohservations - then taking the reciprocal of that average.
Foreign currency transactions
Fixed-rate perpetual preferred stock
Skewed
Harmonic mean
16. Additional margin that must be deposited in an amount sufficient to bring the balance up to the initial margin requirement.
Variation margin
Matrix pricing
Component cost of capital
Tracking error
17. Ratios that measure how efficiently a company performs day-to-day tasks - such as the collection of receivables and management of inventory.
Activity ratios (asset utilization or operating efficiency ratios)
Sample statistic or statistic
Discounted cash flow analysis
First-differencing
18. The rate at which periodic interest payments are calculated.
Stated rate (nominal rate or coupon rate)
General Agreement on Tariffs and Trade
Presentation currency
Settlement price
19. 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.
Implied yield
Organic growth
Credit-linked notes
Before-tax cash flow
20. Under U.S. GAAP - a mea-sure used in estimating a defined-benefit pension plan's liabilities - defined as the 'actuarial present value of vested benefits.'
Trust receipt arrangement
Agency relationships
Financial futures
Vested benefit obligation
21. A procedure for determining the interest on a bond or loan in which the interest is added onto the face value of a contract.
Residual income method (or excess earnings method)
Constant maturity swap or
Share-the-gains - share-the-pains theory
Add-on interest
22. A measure of goodness-of-fit of a regres-sion that is adjusted for degrees of freedom and hence does not automatically increase when another independent variable is added to a regression.
Vested benefits
Minority active investments
Adjusted R2
Cash flow at risk (CFAR)
23. A financial state-ment that reconciles beginning-of-period ana end-of-period balance sheet values of retained income; shows the linkage between the balance sheet and income statement.
Statement of retained earnings
Cash ratio
Covariance
Exposure to foreign exchange risk
24. The use of computer networks to conduct financial transactions electronically.
Electronic funds transfer
Independent variable
Out-of-the-money
Market-extraction method
25. A money measure of the goods and services produced within a country's borders over a stated time period.
Macroeconomic factor
Gross domestic product
Company share-related factors
Interest rate floor or floor
26. The fixed price at which an option holder can buy or sell the underlying.
Bottom-up analysis
Exercise price (strike price - striking price - or strike)
Financial leverage ratio
Acquisition
27. An option in which the holder has the right to make a known interest payment and receive an unknown interest payment.
Greenmail
Interest rate call
Interval scale
Monetary/nonmonetary method
28. An amount or percent-age deducted from the pro rata share of 100 per-cent of the value of an equity interest in a business to reflect the absence of some or all of the powers of control.
Relative frequency
Discount for lack of control
Protective put
Multiple linear regression model
29. An act passed by the U.S. Con-gress in 2002 that created the Public Company Accounting Oversight Board (PCAOB) to oversee auditors.
Owners' equity
Nominal exchange rate
Bill-and-hold basis
Sarbanes-Oxley Act
30. An inter-national agreement signed in 1947 to reduce tar-iffs on international trade.
Balance sheet (statement of fmandal position or state-ment of fmandal condition)
General Agreement on Tariffs and Trade
Brokerage
Dirty surplus items
31. The most recent quarterly dividend multiplied by four.
Proxy statement
Dividend rate
Maintenance margin requirement
Harmonic mean
32. The difference between the maximum and minimum values in a dataset.
Day trader
Range
Agency costs
Initial margin requirement
33. With reference to the cash flow statement - a format for the presentation of the statement in which cash flow from operat-ing activities is shown as operating cash receipts less operating cash disburseme ts.
Rho
Cash ratio
Direct format (direct method)
Relative dispersion
34. The condition in futures markets in which futures prices are higher than expected spot prices.
Laddering strategy
Normal contango
Constant maturity treasury or
Growth investors
35. Investments in which investors exert significant influence - but not con-trol - over the investee. Typically - the investor has 20 to 50 % ownership in the investee.
Factor sensitivity (also factor betas or factor loadings)
Forward P/E (also leading P/E or prospective P/E)
Net asset balance sheet exposure
Minority active investments
36. An interest rate swap in which one party pays a fixed rate and the other pays a float-ing rate - with both sets of payments in the same currency.
One third rule
U.S. GAAP and uniting of interests under IFRS
Plain vanilla swap
Capital structure
37. A method for accounting forthe effect of convertible securities on earnings pershare (EPS) that specifies what EPS would havebeen if the convertible securities had been con-verted at the beginning of the period - taking account of the effects of conv
Current credit risk
Industry structure
Pairs trading
If-converted method
38. With reference to investment selection processes - an approach that starts with macro selection (i.e. - identifying attractive geo-graphic segments andVor industry segments) and then addresses selection 0 the most attractive investments within those
Estimated (or fitted) parameters
Parametric test
Top-down analysis
Captive rmance subsidiary
39. A multifactor model In which statistical methods are applied to a set of historical returns to determine portfolios that best explain either historical return covariances or vanances.
Statistical factor models
Cash-generating unit
Opportunity cost
Accounting profit (income before taxes or pretax income)
40. The ratio of a stock's market price to some m asure of va ue per share.
Interest rate put
Covered call
Price multiple
Precautionary stocks
41. When assets trans-lated at the current exchange rate are greater in amount than liabilities translated at the current exchange rate. Assets exposed to translation gains or losses exceed the exposed liabilities.
Comparative advantage
Legal risk
Risk governance
Net asset balance sheet exposure
42. The loss in the value of an option resulting from movement of the option price toward its payoff value as the expiration day approaches.
Nominal rate
Time value decay
White knight
Deep out of the money
43. An attempt to acquire a com-pany against the wishes of the target's managers.
Mature growth rate
Sample selection bias
Hostile transaction
Current account
44. A person or organization seeking to profit by acquiring a company and reselling it - or seeking to profit from the takeover attempt itself (e.g. - greenmail).
Corporate raider
Yield beta
Projected unit credit method
Equity risk premium
45. Quantiles that divide a distribution into 100 equal parts.
Winner's curse
Mark-ta-market
Put-call parity
Percentiles
46. The fixed rate at which the holder of an interest rate option can buy or sell the underlying.
NTM P/E
Exercise rate or strike rate
Capital structure
Stratified random sampling
47. The cash flow that is real-ized because of a decision; the changes or incre-ments to cash flows resulting from a decision or action.
Clean surplus accounting
Incremental cash flow
Internal rate of return (IRR)
Shareholders' equity
48. Aka 'Residual income. '
Nonconventional cash flow
Economic profit
Poison puts
Consolidation
49. Aka Liquidity discount.
Unearned fees
Illiquidity discount
Credit derivatives
Plain vanilla swap
50. Cannibalization occurs when an investment takes customers and sales away from another part of the company.
Linear association
Cannibalization
Total probability rule for expected value
Residual autocorrelations