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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. The rate of return that must be met fora project to be accepted.
Direct debit program
Degrees of freedom (df)
Hurdle rate
Other comprehensive income
2. An amount equal to net taxes minus government expenditure on goods and services.
Mode
Government sector surplus or deficit
Money market
Acquiring company - or acquirer
3. Observations on characteristic(s) of the same observational unit through time.
Leverage
Longitudinal data
Debtor nation
Discrete time
4. In reference to short-term cash management - it is an investment strategy charac-terized by simple decision rules for making daily investments.
Enterprise value multiple
Number of days of receivables
Passive strategy
Investment constraints
5. A country's record of international trading - borrowing - and lending.
Constant maturity swap or
Dividend payout policy
Balance of payments accounts
Index option
6. The first date that a share trades without (i.e. - 'ex') the dividend.
Generalized least squares
Ex-dividend date
Cash basis
Dealing securities
7. Trading ex-dividend refers to shares that no longer carry the right to the next dividend payment.
Ex-dividend
Current cost
Normal backwardation
Straight-line method
8. Investments in which the investor has no signifi-cant influence or control over the operations of the investee.
Minority passive investments (passive investments)
Segment turnover
Asset purchase
Up transition probability
9. 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).
Out-of-sample forecast errors
Expiration date
Financial reporting quality
Blockage factor
10. Not due to be consumed - converted into cash - or settled within one year after the bal-ance sheet date.
Exposure to foreign exchange risk
Equity carve-out
Cash-flow-statement-based accruals ratio
Noncurrent
11. A purchase involving a buyer that would benefit from certain synergies associ-ated with owning the target firm.
Strategic transaction
Capital rationing
Finance lease (capital lease)
Target company - or target
12. CMT A hypothetical U.S. Treasury note with a constant maturity. A CMT exists for various years in the range of 2 to
Stated rate (nominal rate or coupon rate)
Treasury shares
Constant maturity treasury or
Duration
13. The number of shares that target stockholders are to receive in exchange for each of their shares in the target company.
Exchange ratio
Organic growth
Trading securities (held-for-trading securities)
Current liabilities
14. A form of active strategy which entails scheduling maturities on a systematic basis within the investment portfolio such that invest-ments are spread out equally over the term of the ladder.
Longitudinal data
Stress testing
Current rate method
Laddering strategy
15. The process of using an option to buy or sell the underlying.
Compiled f'mancial statements
Exercise or exercising the option
Pure factor portfolio
Cash conversion cycle (net operating cycle)
16. An approach for estimating a country's equity risk premium. The market rate of return is estimated as the sum of the dividend yield and the growth rate in dividends for a market index. Subtracting the risk-free rate of return from the estimated marke
Pre-investing
Dividend discount model based approach
Receivables turnover
Net asset balance sheet exposure
17. The competitive strategy of offeringunique products or services along some dimen-sions that are widely valued by buyers so that thefirm can command premium prices.
Differentiation
Backtesting
Ordinal scale
Position trader
18. 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
Activity ratios (asset utilization or operating efficiency ratios)
Net operating profit less adjusted taxes - or NOPLAT
Collar
Cash
19. Corporate earnings are taxed twice when paid out as dividends. First - corporate earn-ings are taxed regardless of whether they will be distributed as dividends or retained at the G-13 corporate level - and second - dividends are taxed again at the i
Cash ratio
Double taxation
Dividend payout ratio
Logit model
20. An option strategy in which a long position in a certain number of options is offset by a short position in a certain number of other options on the same underlying - resulting in a risk-free position.
Ratio spread
Sustainable growth rate
Projected unit credit method
Delta-normal method
21. A regression estimation technique that addresses heteroskedasticity of the error term.
Generalized least squares
Residual loss
Electronic funds transfer
Return on equity (ROE)
22. 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) .
Electronic funds transfer
Dead-hand provision
Point estimate
Accelerated methods of depreciation
23. Hirschman Index A measure of rna ket concentration that is calculated by summing the squared mar et shares for competing companies in an industry; high HHI readings or mergers that would result in large HHI increases are more likely to result in regu
Debt covenants
Her rmdahl-
Out-of-sample test
Duration
24. The risk of loss from failures in a company's systems and proce-dures (for example - due to computer failures or human failures) or events completely outside of the control of organizations (which would include 'acts of God' and terrorist actions) .
Operations risk or operational risk
Price to cash flow
Priced risk
Capped swap
25. A test for conditional het-eroskedasticity in the error term of a regression.
Reorganization
Build-up method
Economic order quantity-reorder point
Breusch-Pagan test
26. With reference to assets - the amount of cash or cash equivalents that could currently be obtained by sell ing the asset i an orderly disposal; with reference to lia-bilities - the undiscounted amount of cash or cash equivalents expected to be paid t
Vega
Survivorship bias
Realizable value (settlement value)
Price to sales
27. A valuation multiple that relates the total market value of all sources of a company's capital (net of cash) to a measure of fundamental value for the entire company (such as a pre-interest earnings measure).
Offsetting
Longitudinal data
Time series
Enterprise value multiple
28. A fUl !lction giving the probability of joint occurrences of values of stated random variables.
J oint probability function
Minimum-variance frontier
Statistic
Common-size analysis
29. PIE The price-to-earnings ratio that is fair - warranted - or justified on the basis of forecasted fundamentals.
Justified (fundamental)
Other receivables
Convertible debt
Working capital turnover
30. A reduction in proportional ownership inter-est as a result of the issuance of new shares.
Dilution
North
Comparables (comps - guideline assets - guideline com-panies)
Solvency
31. The share price at a particular point in the future.
Discount
Projected benefit obligation
Terminal share price
Target balance
32. A tool that calculates the contri-bution to real CDP growth of each of its sources.
Market timing
Combination
Growth phase
Growth accounting
33. The day that employees actually exer-cise the options and convert them to stock.
Trade credit
White-corrected standard errors
Exercise date
Legal risk
34. Attempts by management to encourage analysts to forecast a slightly lower number for expected earnings than the analysts would otherwise forecast.
Growth accounting
Financial flexibility
Working capital turnover
Earnings expectation management
35. A form of restructuring in which sharehold-ers of the parent company are given shares in a /Jewl y c eated entity in e~change for their shares of the pare ~ company.
Sharpe ratio
Split-off
Arithmetic mean
Population mean
36. Offering two or more products for sale as a set.
Salvage value
Interest rate swap
Bundling
Sovereign yield spread
37. The government's holding of foreign cun; - e.!}cy.
Earnings per share
U.S. official reserves
Long
Asset-based approach
38. An algorithm that pro-duces uniformly distributed random numbers between 0 and 1.
Mean excess return
Random number generator
Defined benefit obligation
Permutation
39. The date of the final paymen on a swap' also - the swap's e piration date.
Weighted mean
Temporal method
Cash flow from operations (cash flow from operating activities or operating cash flow)
Termination date
40. The graph of the capital asset pricing model.
Multi-step format
ecurity market line (SML)
Expenses
Tobin's q
41. A balance sheet organized so as to group together the various assets and liabilities into subcategories (e.g. - current and noncurrent) .
Classified balance sheet
Monopolization
Systematic factors
Probability
42. Activities that are part of the day-to-day business functioning of an entity - such as selling inven tory and providing services.
Operating activities
Identifiable intangible
Agency costs of equity
Earnings game
43. The granting of stock to employees as a form of compensation.
Minority passive investments (passive investments)
Enterprise risk management
Stock grants
Partnership
44. The concept that dividends paid now displace earnings in all future periods.
Financial distress
Floored swap
Dividend displacement of earnings
Price to book value
45. An approach to investing thatfocuses on the individual characteristics of securi-ties rather than on macroeconomic or overall market forecasts.
Bottom-up investing
White sqnire
Sampling error
Delivery
46. Is Derivatives in which the payoffs occur if a specific event occurs; generally referred to as options.
Swaption
Eurodollar
Overall capitalization rate
Contingent clain
47. The number of units produced and sold at which the company's net income is zero (revenues = total costs).
Functional currency
Breakeven point
Homogenization
Securities Exchange Act of 1934
48. A mean computed after excluding a stated small percentage of the lowest and highest observations.
Fundamental factor models
Blockage factor
Trimmed mean
Proxy statement
49. A measure of the sensitivity of a bond's yield to a general measure of bond yields in the market that is used to refine the hedge ratio.
Chain rule of forecasting
Delta
No-growth company
Yield beta
50. A yield on a basis comparable to the quoted yield on an interest-bearing money market instrument that pays interest on a 360-<iay basis; the annualized holding period yield - assuming a 360-<iay year.
Full price
Conglomerate discount
Vertical analysis
Money market yield (or CD equivalent yield
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