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CFA Level2 Vocab

Subjects : certifications, cfa
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • 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. An unlimited funds environment assumes that the company can raise the funds it wants for all profitable projects simply by paying the required rate of return.






2. The mix of a company's variable costsand fixed costs.






3. The assumption of equal priorprobabilities.






4. 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.






5. Current market w ice divided by the most recent quarterly per-share dividend multiplied by four.






6. 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






7. A measure of VAR equivalentto the analytical method bu t that refers to the use of delta to estimate the option's price sensitivity.






8. The unsold units of product on hand.






9. A function giving the probability that a random variable is less than or equal to a specified value.






10. The combination of puts - the underly-ing - and risk-free bonds that replicates a call option.






11. Describes a distribution that is less peaked than the normal distribution.






12. Aka 'Residual income.'






13. Aka 'Residual income. '






14. Depreciatiolil methods that allocate a relatively large proportion of the cost of an asset to the early years of the asset's useful life.






15. Generally - a synonym for revenue; 'sales' is generally understood to refer to the sale of goods - whereas 'revenue' is understood to include the sale of goods or services.






16. The process by which options and other derivatives are priced by treating investors as though they were risk neutral.






17. The system of principles - policies - procedures - and clearly defined responsi-bilities and accountabilities used by stakeholders to overcome the conflicts of interest inherent in the corporate form.






18. Net earnings avail-able to common shareholders (i.e. - net income minus preferred dividends) divided by the weighted average number of common shares out-standing during the period.






19. A function with non-negative values such that probability can be described by areas under the curve graphing the function.






20. A measurement scale that sorts data into categories that are ordered (ranked) with respect to some characteristic.






21. Very liquid short-tenn investments - usually maturing in 90 days or less.






22. Controlling additional property throughreinvestment - refinancing - and exchanging.






23. The positive square root of the variance; a measure of dispersion in the same units as the original data.






24. With reference to investmentselection processes - an approach that involves selection from all securities within a specified investment universe - i.e. - without prior narrowiNg of the universe on the bas' s of macroeconomj c or overall market consid






25. An option in which the holder has the right to make an unknown interest payment and receive a known interest payment.






26. The evaluation of credit risk; the evaluation of the creditworthiness of a borrower o r counterpar ty.






27. A subset of a larger popula-tion created in such a way that each element of the population has an equal probability of being selected to the subset.






28. Debt issued with warrants that give the bondholder the right to purchase equity at prespecified terms.






29. Income rate that reflects the relationship between equity income and equity capital.






30. A wholly-owned sub-sidiary of a company that is established to provide financing of the sales of the parent company.






31. A portfolio offering the highest expected return for a given level of risk as mea-sured by variance or standard deviation of return.






32. Total assets minus total liabilities.

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33. An adjustment used to facilitate delivery on bond futures contracts in which any of a number of bonds with different characteristics are eligible for delivery.






34. An Activity ratio calculated as total revenue divided by average net fixed assets.






35. A purchase involving a buyer having essentially no material synergies with the target (e.g. - the purchase of a private company by a company in an unrelated industry or by a private equity firm would typically be a financial transaction) .






36. An estimate of the country spread (country equity premium) for a develop-ing nation that is based on a comparison of bonds yields in country being analyzed and a developed country. The sovereign yield spread is the differ-ence between a government bo






37. The value derived using a sum-of-the-parts valuation.






38. The ratio of the percentage change in net income to the percent-age change in operating income; the sensitivity ofthe cash flows available to owners when operating income changes.






39. The excess of assets over liabilities; the residual interest of shareholders in the assets of an entity after deducting the entity's liabilities.

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40. An approach to portfolio analysis using expected means - variances - and covariances of asset returns.






41. A legal entity with rights similar to those of a person. The chief officers - executives - or top managers act as agents for the firm and are legally entitled to authorize corporate activi-ties and to enter into contracts on behalf of the business.






42. A number between 0 and 1 describing the chance that a stated event will occur.






43. Assets that can be most readily con-verted to cash (e.g. - cash - short-term marketable investments - receivables) .






44. The income tax owed by the company on the basis of taxable income.






45. A swap in which one party agrees to pay the total return on a security. Often used as a credit derivative - in which the underlying is a bond.






46. The use of fixed costs in operations.






47. Aka Harmonic mean.






48. The price multiple for a stock assumed to hold at a stated future time.






49. EPS) Netincome - minus preferred dividends - divided bythe number of common shares outstanding con-sidering all dilutive securities (e.g. - convertibledebt and options); the EPS that would result if alldilutive securities were converted into commonsh






50. A portfolio having factor sensitiv-ities that are matched to those of a benchmark or other portfolio.







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