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Test your basic knowledge |
CFA Level2 Vocab
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Subjects
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
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study here
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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. Quantiles that divide a distribution into four equal parts.
Financing activities
Quartiles
Deferred tax assets
Return on common equity (ROCE)
2. A transformation that subtracts the value of the time series in period t - 1 from its value in period t.
Single-step format
First-differencing
Official settlements account
Solvency
3. The part of the execution step of the portfolio manage-ment process in which investment strategies are integrated with expectations to select a portfolio of assets.
Modified duration
Portfolio selection/composition problem
U.S. GAAP and uniting of interests under IFRS
Ordinary shares (common stock or common shares)
4. The return that an investorearns during a specified holding period; a syn-onym for total return.
Random number generator
Holding period return
Test statistic
Cash-flow-statement-based accruals ratio
5. A profitability ratio calcu-lated as net income divided by average sharehold-ers' equity.
Unlimited funds
Top-down investing
Return on equity (ROE)
Unclassified balance sheet
6. The hypothesis accepted when the null hypothesis is rejected.
Box spread
Alternative hypothesis
Operating cycle
Nonlinear relation
7. An Activity ratio calculated as total revenue divided by average net fixed assets.
Butterfly spread
Multi-step format
Fixed asset turnover
Forward integration
8. Options that - if exercised - would result in the value received being worth more than the payment required to exercise.
Comprehensive income
In-the-money
Degree of financial leverage (DFL)
No-growth company
9. A transformation that involves sub-tracting the mean and dividing the result by the standard deviation.
Root mean square(l er ror (RMSE)
Standardizing
Survey approach
Risk-neutral probabilities
10. An estimation formula; the formula used to compute the sample mean and other sample statistics are examples of estimators.
Estimator
Multi-step format
Neoclassical growth theory
Binomial random variable
11. A method of presentation of accounting transactions in which effects on assets appear at the left and effects on liabilities and equity appear at the right of a central dividing line; also known as T-account format.
Normal contango
Diff swaps
Defined-benefit pension plans
Account format
12. A value against which a computed test statistic is compared to decide whether to reject or not reject the null hypothesis.
Maintenance margin requirement
Minimum-variance portfolio
Hypothesis
Rejection point (or critical value)
13. The present value of an investment's cash inflows (benefits) minus the present value of its cash outflows (costs).
Standardized unexpected earnings (SUE)
J oint probability function
Net present value (NPV)
Normalized
14. A limit move in the futures market in which the price at which a transaction would be made is at or below the lower limit.
ackwardation
Percentiles
Liruit down
Macaulay duration
15. A beta that is based at least in part on fundamental data for a company.
Fundamental beta
Investment strategy
Interest rate swap
Index option
16. Computer-generated sensitivity or sce-nario analysis that is based on probability models fo r the factors that drive outcomes.
Active specific risk or asset selection risk
Investment constraints
Simulation
Differentiation
17. An option in which the underlying value equals the exercise price.
Residual dividend approach
Nonearning assets
At the money
Clientele effect
18. An inventory accounting method that averages the total cost of available inventory items over the total units avail-able for sale.
Sample selection bias
Cyclical businesses
Normalized earnings per share (or normal earnings per share)
Weighted average cost method
19. A loan in which the interest rate is reset at least once after the starting date.
First-order serial correlation
Floating-rate loan
Dividend rate
Robust
20. The difference between the third and fi rst quarti les of a dataset.
Orderly liquidation value
Spin-off
Interquartile range
Multiple
21. A two-dimensional plot of pairs of obser-vations on two data series.
Drag on li
Economic profit
Scatter plot
Expanded
22. Costs borne by management to assure owners that they are working in the own-ers' best interest (e.g. - implicit cost of non-compete agreements).
Inventory turnover
Bonding costs
Linear trend
Likelibood
23. Investments in which investors exert significant influence - but not con-trol - over the investee. Typically - the investor has 20 to 50 % ownership in the investee.
Minority active investments
Treasury shares
Safety stock
Method of comparables
24. The yield to maturity on a basis that ignores compounding.
Other receivables
Economic growth
Multiplication rule for probabilities
Bond-equivalent yield
25. The day that employees actually exer-cise the options and convert them to stock.
Terminal price multiple
No-growth company
Pet projects
Exercise date
26. Revenue after adjustments (e.g. - for estimated returns or for amounts unlikely to be collected).
Standard cost
Net revenue
Top-down investing
Mixed offering
27. Netting the market values of all derivative contracts between two parties to deter-mine one overall value owed by one party to another in the event of bankruptcy.
Transaction exposure
Stock options (stock option grants)
Mean-variance analysis
Closeout netting
28. Approach that values a private company based on the values of the underlying assets of the entity less the value of any related liabilities.
Mode
Asset-based approach
Joint venture
Active risk squared
29. 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.
Basic earnings per share (EPS)
Trimmed mean
Holder-of-record date
Degree of operating leverage (DOL)
30. The condition in which supply equals demand.
Box spread
Negative serial correlation
Equilibrium
Forward dividend yield
31. An option in which the underlying is a stock index.
Capped swap
Descriptive statistics
Grant date
Index option
32. The Eurodollar rate at which London banks lend dollars to other London banks; considered to be the best representative rate on a dollar borrowed by a private - high-quality borrower.
Mesokurtic
London Interbank Offer Rate (LIBOR)
Per unit contribution margin
Reconciliation
33. A basis for stating an annual yield that annualizes a semiannual yield by dou-bling it.
Carrying amount (book value)
Trimmed mean
Bond-equivalent basis
Special purpose entity (special purpose vehicle or variable interest entity)
34. A multifactor model In which statistical methods are applied to a set of historical returns to determine portfolios that best explain either historical return covariances or vanances.
Statistical factor models
Number of days of payables
Residual income model (RIM) (also discounted ahnormal earnings model or Edwards-Bell-Ohlson model)
Residual loss
35. CreaLing a contrac t with standard and generally accepted terms - which makes it moreacceptable to a broader group of participants.
Dividend discount model based approach
Pairs arbitrage
Homogenization
omparable company
36. Assets that can be most readily con-verted to cash (e.g. - cash - short-term marketable investments - receivables) .
Quick assets
Total asset turnover
Residual income method (or excess earnings method)
Random walk
37. With reference to events - the propertythat the probability of one event occurringdepends on (is related to) the occurrence ofanother event.
Dependent
Cash ratio
ecurity market line (SML)
Seats
38. 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.
Leading dividend yield
Market approach
Residual income method (or excess earnings method)
Book value equity per share
39. 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
Giro system
Factor risk premium (or factor price)
Cheapest to deliver
Central limit theorem
40. An estimate of the average time that elapses between paying suppliers for materi-als and collecting cash from the subsequent sale of goods produced.
Adjusted present value (APV)
Net operating cycle
Excess kurtosis
Fair value
41. The sample autocorrela-tions of the residuals.
Capture hypothesis
Salvage value
Residual autocorrelations
Bargain purchase
42. 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.
Drag on li
Sales risk
Poison puts
Corporate governance
43. A forecasting approach that involves aggregating the individual company forecasts of analysts into industry fore-casts - and finally into macroeconomic forecasts.
Bottom-up forecasting approach
Carried interest
Unconditional probability (or marginal probability)
Cost of preferred stock
44. Costs that fluctuate with the level of production and sales.
Active return
Direct sales-comparison approach
Held-for-trading securities (trading securities)
Variable costs
45. A condition in the futures markets in which the benefits of holding an asset exceed the costs - leaving the futures price less than the spot price.
Interest rate forward
ackwardation
Book value equity per share
Dummy variable
46. Risk for which investors demand com-pensation for bearing (e.g. - equity risk - company-specific factors - macroeconomic factors).
Nonstationarity
Sum-of-the-parts valuation
Priced risk
Paired comparisons test
47. A distribution that specifies the probabilities for a single random variable.
Trust receipt arrangement
Simulation
Equity method
Univariate distribution
48. The rate at which an option's time value decays.
Theta
Nonmonetary assets and liabilities
Potential credit risk
Transaction exposure
49. Members ips in a derivatives exchange.
Floored swap
Cash ratio
Forward dividend yield
Seats
50. A tabular display of data summarized into a relatively small number of intervals.
Frequency distribution
Spurious correlation
Vesting date
Autocorrelation