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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.
Market efficiency
Sunk cost
Fixed-rate perpetual preferred stock
Comprehensive income
2. A transformation that subtracts the value of the time series in period t - 1 from its value in period t.
Linear interpolation
First-differencing
Market efficiency
Premise of value
3. The cost associated with holding someasset - including financing - storage - and insurancecosts. Any yield received on the asset is treated as anegative carrying cost.
Cost of carry
Potential credit risk
Free cash flow to equity
New growth theory
4. 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.
Creative response
Active portfolio
Account
Roy's safety first criterion
5. The amount to which a payment or series of payments will grow by a stated future date.
Median
Cnsistent
Default risk premium
Future value (FV)
6. A merger in which one company ceases to exist as an identifiable entity and all its assets and liabilities become part of a purchasing company.
Market risk premium
Tracking risk
Pecking order theory
Statutory merger
7. Division ofnet operating income by an overall capitalization rate to arrive at market value.
World Trade Organization
Present value (PV)
Direct income capitalization approach
Dependent
8. An option in which the holder has the right to make an unknown interest payment and receive a known interest payment.
Interest rate put
Time to expiration
Neoclassical growth theory
Price relative
9. The expected return in excess of the risk-free rate for a portfolio with a sensitivity of 1 to one factor and a sensitivity of 0 to all other factors.
Factor risk premium (or factor price)
Prepaid expense
Matrix pricing
Settlement period
10. The slope coefficients in a multiple regression.
Multivariate distribution
Equity dividend rate
Account format
Partial regression coefficients or partial slope coeffi-cients
11. The slope of the capital market line - indicating the market risk premium for each unit of market risk.
Quantile (or fractile)
Variance
Population variance
Market price of risk
12. A portfolio having factor sensitiv-ities that are matched to those of a benchmark or other portfolio.
Lack of marketability discount
Shark repellents
Variation margin
Tracking portfolio
13. The competitive strategy of being the lowest cost producer while offering products comparable to those of other firms - so that prod-ucts can be priced at or near the industry average.
Cost leadership
Joint venture
Frequency polygon
Perfect collinearity
14. The present discounted value of future cash flows: For assets - the present dis-counted value of the future net cash inflows that the asset is expected to generate; for liabilities - the present discounted value of the future net cash outflows that a
Present value (PV)
Upstream
Transition phase
Annual percentage rate
15. The date on which the parties to a swap make payments.
Multiple linear regression
Settlement date or payment date
Normalized
Cost approach to value
16. A criterion asserting that the optimal portfolio is the one that minimizes the probability that portfolio return falls below a threshold level.
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17. A test that is not concerned with a parameter - or that makes minimal assumptions about the population from which a sam Ie comes.
Liruit move
Economic growth rate
Leveraged buyout (LBO)
Nonparametric test
18. A measurement scale that has all the characteristics of interval measurement scales as well as a true zero point as the origin.
Cyclical businesses
Ratio scales
Component cost of capital
Derivative
19. Costs of inven tories including costs of purchase - costs of conversion - other costs to bring the inventories to their present location and condition - and the allocated portion of) fixed production overhead costs.
Sharpe's measure
Estimation
Capitalized inventory costs
Gross profit argin
20. PIE (or forward PIE or prospective PIE) A stock's current price divided by the next year's expected earnings.
Interest rate floor or floor
Proxy fight
Off-market
Leading
21. A business's value under a going-concern assumption.
Purchased in-process research and development costs
Going-concern value
Nontariff barrier
Lack of marketability discount
22. A valuation ratio calculated as price per share divided by book value per share.
Price multiple
Interest rate floor or floor
Exercise date
Price to book value
23. A quantity computed from or used to describe a sample of data.
Active specific risk or asset selection risk
Bond-equivalent yield
Statistic
Valuation
24. A policy regime is one that selects a target path for the exchange rate with interven-tion in the foreign exchange market to achieve that path.
Net liability balance sheet exposure
Flip-in pill
Crawling peg
Roy's safety first criterion
25. A form ofcommon-size analysis in which the accounts in agiven period are used as the benchmark or baseperiod - and every account is restated in subse-quent periods as a percentage of the base period'ssame account.
Fixed costs
Risk-neutral probabilities
Tax base (tax basis)
Horizontal common-size analysis
26. CMT A hypothetical U.S. Treasury note with a constant maturity. A CMT exists for various years in the range of 2 to
Classical growth theory
Cnsistent
Constant maturity treasury or
Delta-normal method
27. Method used under IFRS to estimate the defined benefit obligation; for each period in which employees provide services - they earn a portion of the post-employment bene-fits that the company has promised to pay.
In-process research and development
Qualifying special purpose entities
Projected unit credit method
Required rate of return
28. The quantity of real CDP pro-duced by an hour of labor.
Vesting date
Central limit theorem
Time value decay
Labor productivity
29. 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.
Sector neutral
Prior probabilities
Sharpe's measure
Annuity
30. The probability that an asset's value moves up.
Ordinal scale
Shark repellents
Payer swaption
Up transition probability
31. Probabilities that generally do not vary from person to person; includes a pri-ori and objective probabilities.
Objective probabilities
Cherry-picking
Nonparametric test
Price relative
32. A time series that is not covariance station-ary is said to have a unit root.
Covered interest arbitrage
Spread
Robust
Unit root
33. The price multiple for a stock assumed to hold at a stated future time.
Present (price) value of a basis point (PVBP)
Number of days of payables
Terminal price multiple
Transactions motive
34. With reference to the error term of a regression - having a variance that differs across observations.
Capture hypothesis
Heteroskedastic
Financial reporting quality
Out-of-sample forecast errors
35. A prof -itabili ty ratio calculated as operating income (i.e. - income before inte est and taxes) divided by revenue.
Pure factor portfolio
Positive serial correlation
Ope ating profit margin (operating margin)
Revolving credit agreements
36. 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.
Financial reporting quality
Liquidation
Multi-step format
Median
37. A process used in a deliverable forward contract in which the long pays the agreed-upon price to the short - which in turn delivers the underlying asset to the long.
Financing activities
Portfolio implementation problem
Delivery
Dirty surplus items
38. 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.
Financial transaction
Statement of retained earnings
Lessee
Stock grants
39. Factors related to the company's internal performance - such as factors relating to earnings growth - earnings variability - earnings momentum - and financial leverage.
Surprise
Company fundamental factors
Tree diagram
Futures commission merchants (FCMs)
40. The sum of market value of common equity - book value of preferred equity - and face value of debt.
Bond-equivalent yield
Total invested capital
Terminal value of the stock (or continuing value of the stock)
Internal rate of return (IRR)
41. The difference between current assets and current liabilities.
Skewness
Working capital
Credit spread option
Measure of central tendency
42. The strongest form of short-term bank borrowing facilities; they are in effect for multiple years (e.g. - 3-5 years) and may have optional medium-term loan features.
Revolving credit agreements
Risk governance
Growth option or expansion option
Equity forward
43. Earnings per share divided by price; the reciprocal of the PIE ratio.
Intrinsic value or exercise value
Earnings yield
Tax expense
Sovereign yield spread
44. The amount of dispersion rela-tive to a reference value or benchmark.
Two-sided hypothesis test (or two-tailed hypothesis test)
Relative dispersion
Dummy variable
Unit root
45. Weights that are used to compute a binomial option price. They are the probabilities that would apply if a risk-neutral investor valued an option.
Risk-neutral probabilities
Pure discount instruments
Capitalized cash flow model (method)
Generalized least squares
46. A swap in which each party makes ayments to the other in different currenmes.
Currency swap
Accrued expenses (accrued liabilities)
Trend
Trading securities (held-for-trading securities)
47. A solvency ratio calculated as total debt divided by total debt plus total share-holders ' equi ty.
Standard deviation
Debt-to-capital ratio
Accrual basis
Rule of 72
48. An activity ratio equal to the number of days in a period divided by the inventory ratio for the period; an indication of the number of days a company ties up funds in inventory.
Investment opportunity schedule
Active return
Number of days of inventory
Independent projects
49. 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.
Impairment of capital rule
Unearned revenue (deferred revenue)
Declaration date
Cash-generating unit
50. When a bankrupt company is allowed to enforce contracts that are favorable to it while walking away from contracts that are unfa-vorable to it.
Payer swaption
Discrintinant analysis
Cherry-picking
Venturers