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Test your basic knowledge |
CFA Level2 Vocab
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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. In probability - with reference to an event 5 - the event that 5 does not occur; in eco-nomics - a good that is used in conjunction with another good.
Complement
Fixed-income forward
Free cash flow to the
Net asset balance sheet exposure
2. A qualitative-dependent-variable multi-ple regression model based on the logistic proba-bility distribution.
Nonconventional cash flow
Equity
Total asset turnover
Logit model
3. The ratio of the percentage change in net income to the percentage change in units sold; the sensitivity of the cash flows to owners to changes in the number of units pro-duced and sold.
Unexpected earnings (also earnings surprise)
Degree of total leverage
Ex-dividend date
Sole proprietorship
4. The sensitivity of the option price to the risk-free rate.
Crawling peg
Rho
Price momentum
Reviewed fmancial statements
5. A transaction in which a company buys back its own shares. Unlike stock dividends and stock splits - share repurchases use corporate cash.
Leptokurtic
Systematic factors
Interest rate put
Share repurchase
6. The unsold units of product on hand.
Inventory
Purchasing power parity
Full price
Comprehensive income
7. The risk associated with changes in the relative attractiveness of products and services offered for sale - arising out of the competitive effects of changes in exchange rates.
Economic exposure
Deep out of the money
Parameter instability
Enterprise value multiple
8. A tool that calculates the contri-bution to real CDP growth of each of its sources.
Growth accounting
Investment value
Pull on liquidity
Shareholders' equity
9. The number of observations in a given interval (for grouped data) .
Performance guarantee
Leading
Cross-sectional analysis
Absolute frequency
10. A business's value under a going-concern assumption.
Hypothesis testing
Going-concern value
Balance sheet ratios
Materiality
11. With respect to double-entry accounting - a debit records increases of asset and expense accounts or decreases in liability and owners' equity accounts.
Fundamental beta
Dividends per share
Investment opportunity schedule
Debit
12. The amount at which an asset or liability is valued according to account-ing principles.
Stress testing
Protective put
Carrying amount (book value)
Commodity option
13. The positive square root of semivari-ance (sometimes called semistandard deviation) .
Semideviation
Initial public offering (IPO)
Indirect format (indirect method)
Abnormal earnings
14. The price paid to buy an asset.
Payer swaption
Tax loss carry forward
Entry price
Fixed costs
15. In the context ofmerger analysis - it is an estimate of a target com-pany's value found by discounting the company's expected future free cash flows to the present.
Credit risk or default risk
Industry structure
Diffuse prior
Discounted cash flow analysis
16. The value of an asset given a hypothetically complete understand-ing of the asset's investment characteristics; the value obtained if an option is exercised based on current conditions.
Manufacturing resource planning (MRP)
Carrying amount (book value)
Precautionary stocks
Intrinsic value or exercise value
17. The amount for which one can sell some-thing - or the amount one must pay to acquire something.
Scaled earnings surprise
Value
FIFO method
Present value model or discounted cash flow model
18. The error of not rejecting a false null hypothesis.
Type II error
Normal backwardation
Heteroskedastic
Sunk cost
19. A quantity - calculated based on a sam-ple - whose value is the basis for deciding whether or not to reject the null hypothesis.
Long-term debt-ta-assets ratio
American
Priced risk
Test statistic
20. In reference to mergers - it is the savings achieved through the consolidation of operations and elimination of duplicate resources.
Statistics
Liquidity risk
Economies of scale
Molodovsky effect
21. A taxable loss in the current period that may be used to reduce future taxable income.
Tax loss carry forward
Lemons problem
Normal distribution
Investing activities
22. A bank commitment to extend credit up to a pre-specified amount; the commitment is considered a short-term liability and is usually in effect for 364 days (one day short of a full year).
Descriptive statistics
Active portfolio
Committed lines of credit
Strap
23. 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.
Backward integration
Takeover premium
Agency costs of equity
Exports
24. A swap in which the floating rate is the cumulative value of a single unit of currency invested at an overnight rate dur-ing the settlement period.
Overnight index swap (OIS)
Debt incurrence test
Frequency distribution
Potential credit risk
25. A depreciation method tHat allocates the cost of a long-lived asset based on-actual usage during the period .
ecurity market line (SML)
Longitudinal data
Externality
Units-of-production method
26. Arrangements that do not result in additional liabilities on the balance sheet but nonetheless create economic obligations.
Asset-based approach
Debt-to-equity ratio
Statistically significant
Off-balance sheet imancing
27. The argument that it is necessary to protect a new industry to enable it to grow into a mature industry that can compete in world markets.
Takeover premium
Value
Earnings yield
Infant-industry argument
28. FIrm The cash flow available to the company's suppliers of capital after all operat-ing expenses (including taxes) have been paid and necessary investments in working and fixed capital have been made.
Uniting of interests method
Held-for-trading securities (trading securities)
Free cash flow to the
Bottom-up forecasting approach
29. The practice of determining a model by extensive searching through a dataset for statisti-cally significant patterns.
Asset-based valuation
Data mining
Rule of 72
Opportunity set
30. An option that allows the holder to buy (if a call) or sell (if a put) an underlying cur-rency at a fixed exercise rate - expressed as an exchange rate.
Futures commission merchants (FCMs)
Underlying
Statement of retained earnings
Currency option
31. The minimum real wage rate needed to maintain life.
Book value equity per share
Subsistence real wage rate
Defined benefit obligation
Time-period bias
32. Aka 'Market efficiency.
Amortization
Taxable income
Stress testing
Traditional efficient markets formulation
33. Assets that can be most readily con-verted to cash (e.g. - cash - short-term marketable investments - receivables) .
Downstream
Hmnan capital
Asset beta
Quick assets
34. Risk for which investors demand com-pensation for bearing (e.g. - equity risk - company-specific factors - macroeconomic factors).
Priced risk
Deliveryoption
Portfolio performance attribution
Trade receivables (commercial receivables or accounts receivable)
35. Said of a sale in which proceeds are to be paid in installments over an extended period of time.
Bond yield plus risk premium approach
Variance
Installment
Return on total capital
36. To defer the decision to invest in a future projecn until the outcome of some or all of a current project is known. -Projects are sequenced through time - so that investing iN a project creates the option to invest in future projects.
Project sequencing
Pooled estimate
Futures commission merchants (FCMs)
Nonconventional cash flow
37. 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
Fixed-rate perpetual preferred stock
Central limit theorem
Caplet
Value
38. A solvency ratio calculated as EBIT divided by interest payments.
Decision rule
Completed contract
Mixed factor models
Interest coverage
39. When assets trans-lated at the current exchange rate are greater in amount than liabilities translated at the current exchange rate. Assets exposed to translation gains or losses exceed the exposed liabilities.
Net asset balance sheet exposure
Down transition probability
Valuation ratios
Expanded
40. A bar chart of data that have been grouped into a frequency distribution.
Histogram
Liquidity discount
Market rate
Mesokurtic
41. A quoted interest rate that does not account for compounding within the year.
Losses
Differentiation
Stated annual interest rate or quoted interest rate
Vega
42. An approach to valuation that involves using a price multiple to evaluate whether an asset is relatively fairly valued - rela-tively undervalued - or relatively overvalued when compared to a benchmark value of the multiple.
Account
Active risk squared
Creative response
Method of comparables
43. The goods and services that we sell to peo-ple in other countries.
Systematic sampling
Surprise
Exports
Cnsistent
44. A combination of interest rate put options designed to hedge a lender against lower rates on a floating-rate loan.
Interest rate collar
Roy's safety first criterion
Floor
Cannibalization
45. The periodic investment of a fixed amount of money.
Cost averaging
Scalper
Net operating assets
Payer swaption
46. A solvency ratio calculated as total debt divided by total debt plus total share-holders ' equi ty.
Accumulated benefit obligation
Debt-to-capital ratio
Probit model
Cost of preferred stock
47. Financial ratios involving bal-ance sheet items only.
Arithmetic mean
Balance sheet ratios
Conglomerate discount
P Value
48. The extent to which a company's operations are predictable with substantial confidence.
Implied yield
Tender offer
Dividend rate
VISibility
49. The prooability of an observation - given a par ticular set of conditions.
Likelibood
Proxy statement
Before-tax cash flow
Active strategy
50. Long-term assets with physical sub-stance that are used in company operations - such as land (property) - plant - and equipment.
Tangible assets
Flotation cost
Expanded
Mean excess return