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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. A money measure of the goods and services produced within a country's borders over a stated time period.






2. A distribution that specifies the probabilities of a random variable's possible outcomes.






3. 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.






4. 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






5. A basis for reporting investment income in which the investing entity recognizes a share of income as earned rather than as divi-dends when received. These transactions are typi-cally reflected in Investments in Associates or Equity Method Investment






6. The positive square root of semivari-ance (sometimes called semistandard deviation) .






7. An extra return that compen-sates investors for the possibility that the borrower will fail to make a promised payment at the con-tracted time and in the contracted amount.






8. Expectations that differfrom consensus expectations.






9. A listing in which tile order of tile listed items does not matter.






10. Mean active return divided by active risk; or alpha divided by the standarddeviation of diversifiable risk.






11. Said of a sale in which proceeds are to be paid in installments over an extended period of time.






12. Debt with the added feature that the bondholder has the option to exchange the debt for equity at prespecified terms.






13. The minimum real wage rate needed to maintain life.






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






15. The quality of being relatively unaffected by a violation of assumptions.






16. The rate at which an option's time value decays.






17. A transaction whereby the target company management team converts the target to a privately held company by using heavy borrowing to finance the purchase of the target company's outstanding shares.






18. Costs of research and development in progress atan acquired company; often - part of the purchaseprice of an acquired company is allocated to suchcosts.






19. A merger involving companies inthe same line of business - usually as competitors.






20. A poison pill provision that allows for the redemption or cancellation of a poi-son pill provision only by a vote of coNtinuing directors (generally directors who were on the tar-get company's board p rior to the takeover attempt) .






21. A general strategy usually thought of as reducing - if not eliminating - risk.






22. The rate demanded by purchasers of bonds - given the risks associated with future cash payment obligations of the particular bond issue.






23. 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.






24. Theories that posit that cor-porate executives are motivated to engage in mergers to maximize the size of their company rather than shareholder value.






25. The date on which a derivative con-tract expi res.






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






27. The owners' remaining claim on the company's assets after the liabilities are deducted.






28. An approach to using price multiples that relates a price multiple to forecasts of fundamentals through a discounted cash flow model.






29. A variation of a forward contract that has essentially the same basic definition but with some additional features - such as a clearing-house guarantee against credit losses - a daily settlement of gains and losses - and an organized electronic or fl






30. Probabilities reflecting beliefs prior to the arrival of new information.






31. Analysis that involves com-parisons across individuals in a group over a given time period or at a given point in time.






32. An observation drawn from a uni-form distribution.






33. The analyst'S estimate of a stock's value at a particular point in the future .






34. With reference to events - the propertythat the occurrence of one event does not affect the probability of another event occurring.






35. An option strategy involving the purchase of a put and sale of a call in which the holder of an asset gains protection below a certain level - the exercise price of the put - and pays for it by giving up gains above a certain level - the exercise pri






36. Agency costs that are incurred despite adequate monitoring and bonding of management.






37. In accounting contexts - cash on hand (e.g. - petty cash and cash not yet deposited to the bank) and demand deposits held in banks and similar accounts that can be used in payment of obligations.






38. A merger involving the pur-chase of a target ahead of the acquirer in the value or production chain; for example - to acquire a supplier.






39. Potential future payments to the seller that are contingent on the achieve-ment of certain agreed on occurrences.






40. An illiquidity discount that occurs when an investor sells a large amount of stock rela-tive to its trading volume (assuming it is not large enough to constitute a controlling ownership).






41. A tabular display of data summarized into a relatively small number of intervals.






42. An activity ratio calculated as purchases divided by average trade payables.






43. Analysis that shows the changes in key financial quantities that result from given (economic) events - such as the loss of customers - the loss of a supply source - or a catastrophic event; a risk management technique involving examina-tion of the pe






44. Options that - if exercised - would require the payment of more money than the value received and therefore would not be cur-rently exercised.






45. The amount of book value (also called carrying value) of common equity per share of common stock - calculated by dividing the book value of shareholders' equity by the num-ber of shares of common stock outstanding.






46. The amount available for fixed costs and profit after paying variable costs; rev-enue minus variable costs.






47. Provision for a return of invest-ment - net of value appreciation.






48. (Aka forward rate agreement)






49. A transaction executed inthe foreign exchange market in which a currencyis purchased (sold) and a forward contract is sold(purchased) to lock in the exchange rate forfuture delivery of the currency. This transactionshould earn the risk-free rate of t






50. A varia-tion ofVAR that reflects credit risk.