SUBJECTS
|
BROWSE
|
CAREER CENTER
|
POPULAR
|
JOIN
|
LOGIN
Business Skills
|
Soft Skills
|
Basic Literacy
|
Certifications
About
|
Help
|
Privacy
|
Terms
|
Email
Search
Test your basic knowledge |
CFA Level2 Vocab
Start Test
Study First
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. Commercial and investmentbanks that make markets in derivatives.
Asset beta
Risk-neutral valuation
Derivatives dealers
White-corrected standard errors
2. The difference between the third and fi rst quarti les of a dataset.
Efficient portfolio
Tax loss carry forward
Interquartile range
Pairs arbitrage trade
3. Fixed-income secuntles in which the holder of the security has the right to withhold payment of the full amount due at matu-ri ty if a credi t even t occurs.
Precautionary stocks
Collar
Credit-linked notes
Laddering strategy
4. Regulation that allowsprices to reflect only the actual average cost ofproduction and no monopoly profits.
Cost-of-service regulation
Partnership
Direct format (direct method)
Market value of invested capital
5. Analysts who work at brokerages.
Proxy statement
Face value (also principal - par value - stated value - or maturity value)
Sell-side analysts
Real exchange rate
6. In reference to short-term cash management - it is an investment strategy charac-terized by simple decision rules for making daily investments.
Finance lease (capital lease)
Target capital structure
Passive strategy
Dividend payout policy
7. 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) .
Long-term liability
Transactions motive
Liquidity premium
Financial transaction
8. The goods and sernces that we buy from people in other countries.
Depreciation
Dividend payout policy
Imports
Statement of changes in shareholders' equity (state-ment of owners' equity)
9. A dollar deposited outside the United States.
Eurodollar
Operating cycle
Time value of money
Net revenue
10. When a company is acquired and the purchase price is less than the fai r value of the net assets. The current treatment of the excess of fair value over the purchase price is diffe re t under IFRS and U.S. CAAP. The excess is never accounted for as n
Bernoulli random variable
Marking to market
Bargain purchase
Equitizing cash
11. Time thought of as advancing in extremely small increments.
Rule of 70
Molodovsky effect
Initial public offering (IPO)
Continuous time
12. The ratio ofthe percentage change in operating income to the percentage change in units sold; the sensitivity of operating income to changes in units sold.
Liquidity discount
Justified price multiple (or warranted price multiple or intrinsic price multiple)
Degree of operating leverage (DOL)
Forward price or forward rate
13. In reference to corporate taxes - a system that imputes - or attributes - taxes at only one level of taxation. For countries using an imputation tax system - taxes on dividends are effectively levied only at the shareholder rate. Taxes are paid at th
Principal
Imputation
Flip-in pill
Contingent consideration
14. Heteroskedasticity in the error variance that is correlated with the values of the independent variable(s) in the regression.
Intrinsic value or exercise value
Error autocorrelation
Arbitrage opportunity
Conditional heteroskedasticity
15. With reference to time-series mod-els - a model in which the growth rate of the time series as a function of time is constant.
Log-linear model
Effective annual rate
Free cash flow
Diff swaps
16. A merger involving the pur-chase of a target that is farther along the value or production chain; for example - to acquire a distributor.
Stock grants
Shark repellents
Forward contract
Forward integration
17. Observations of a variable over time.
Capital allocation line (CAL)
Debt-to-capital ratio
Time-series data
Parameter instability
18. Factors related to the company's internal performance - such as factors relating to earnings growth - earnings variability - earnings momentum - and financial leverage.
Fundamental factor models
Payables turnover
Company fundamental factors
Debt rating approach
19. Desired investment outcomes; includes risk objectives and return objectives.
Position trader
Accrual basis
Investment objectives
Target capital structure
20. 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.
Market-oriented investors
Money market yield (or CD equivalent yield
Earnings management activity
Robust standard errors
21. The time between settlement dates.
Settlement period
Carrying amount (book value)
Target semivariance
Stock purchase
22. An approach to investing thatfocuses on the individual characteristics of securi-ties rather than on macroeconomic or overall market forecasts.
Bottom-up investing
Poison puts
Receivables turnover
Taxable income
23. The mix of a company's variable costsand fixed costs.
Segment debt ratio
Cost structure
Deregulation
Historical simulation (or back simulation)
24. Aka also enterprise risk management.
Deferred tax liabilities
Quantile (or fractile)
Accrued expenses (accrued liabilities)
Centralization permits economies of scale and allows a company to use some of its risks to offset other risks.
25. Another term for the historical method of estimating VAR. This term is somewhat misleading in that the method involves not a simulation of the past butrather what actually happened in the past - some-times adjusted to reflect the fact that a differen
Historical simulation (or back simulation)
Inverse floater
Down transition probability
Provision
26. The original time to maturity on a swap.
Tenor
Derivatives dealers
Downstream
Manufacturing resource planning (MRP)
27. A condition in the futures markets in which a transaction cannot take place because the price would be beyond the limits.
Locked limit
Floor traders or locals
Tax risk
Standardized beta
28. 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
Empirical probability
Sample skewness
Termination date
Monetary assets and liabilities
29. A random variable hav-ing the outcomes 0 and 1.
Positive serial correlation
Market risk premium
Bernoulli random variable
Grouping by function
30. Regression that models the straight-line relationship between the dependent and independen t variable (s) .
Definition of value (or standard of value)
Rule of 72
Financial futures
Linear regression
31. A pre-offer takeover defense mecha-nism that gives target company bondholders the right to sell their bonds back to the target at a pre-specified redemption price - typically at or above par value; this defense increases the need for cash and raises
Out-of-sample forecast errors
Inverse price ratio
Poison puts
Method of comparables
32. Assets that are expected to bene-fit the company over an extended period of time (usually more than one year).
Multiple linear regression
Noncurrent assets
Exchange rate
Forward rate agreement (FRA)
33. Total company valme (the market value of debt - common equity - and preferred equity) minus the value of cash and investments.
Enterprise value (EV)
Sample skewness
Fixed-income forward
One third rule
34. A type of top-down investing approach that involves emphasizing different eco-nomic sectors based on considerations such as macroeconomic forecasts.
Alternative hypothesis
Sector rotation strategy
Marketability discount
Trading securities (held-for-trading securities)
35. Debt issued with warrants that give the bondholder the right to purchase equity at prespecified terms.
Debt with warrants
Median
Creditworthiness
Leading
36. Increases in economic benefits in the form of inflows or enhancements of assets - or decreases of liabilities that result in an increase in equity (other than increases resulting from contribu-tions by owners) .
Operating cycle
Discount for lack of marketability
Leptokurtic
Income
37. The change in the bond price for a 1 basis point change in yield. Also called basis point value (BPV).
Financial futures
Present (price) value of a basis point (PVBP)
Statistically significant
Working capital turnover
38. The average rate of return in excess of the risk-free rate.
J oint probability function
Log-linear model
Time-period bias
Mean excess return
39. An option that gives the holder the right to buy an underlying asset from another party at a fixed price over a specific period of time.
Risk management
Call
Prior transaction method
Sample statistic or statistic
40. The condition in a financial mar-ket in which two equivalent financial instruments or combinations of financial instruments can sell for only one price. Equivalent to the principle that no arbitrage opportunities are possible.
Law of one price
Potential credit risk
Synthetic forward contract
Probability distribution
41. The amount the company estimates that it can sell the asset for at the end of its useful life.
Weighted harmonic mean
Operating return on assets (operating
Prior probabilities
Salvage value
42. A set of techniques for estimating losses in extremely unfavorable combinations of events or scenarios.
Paired observations
Stress testing
Floor traders or locals
Net asset balance sheet exposure
43. A result indicating that the null hypothesis can be rejected; with reference to an estimated regression coefficient - frequently understood to mean a result indicating that the corresponding population regression coefficient is different from O.
Net lender
Derivative
Spearman rank correlation coefficient
Statistically significant
44. The relationship between option price and volatility.
Exit price
Available-for-sale investments
Vega
Estimated (or fitted) parameters
45. A procedure of selecting every kth member until reaching a sample of the desired size. The sample that results from this procedure should be approximately random.
Net operating profit less adjusted taxes - or NOPLAT
Systematic sampling
Pyramiding
Economies of scale
46. A strategy used to replicate an index. It is also used to take a given amount of cash and turn it into an equity position while maintaining the liquidity provided by the cash.
Valuation ratios
Margin
J oint probability function
Equitizing cash
47. 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.
Corporation
Revaluation
Strategic transaction
Earnings management activity
48. Asset outflows not directly related to the ordi-nary activities of the business.
Losses
Portfolio performance attribution
Mean
Effective annual rate
49. The process of using an option to buy or sell the underlying.
Vega
Liruit move
Financial reporting quality
Exercise or exercising the option
50. A type of weighted mean computed by averaging the reciprocals of the ohservations - then taking the reciprocal of that average.
Harmonic mean
Revenue
Straight-line method
Agency problem - or principal-agent problem