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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. The risk of a change in value of a n asset or liability denomi-nated in a foreign currency due to a change in exchange rates.






2. Method used to estimate the overall capitalization rate by dividing the sale price of a comparable income property into the net operating income.






3. A model of stock valuation that views intrinsic value of stock as the sum of book value per share plus the present value of the stock's expected future residual income per share.






4. 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.






5. A public document that provides the material facts concerning matters on which shareholders will vote.






6. Uncorrelated; at a right angle.






7. A calculation of yield that is annualized using the ratio of 365 to the number of days to maturity. Bond equivalent yield allows for the restatement and comparison of securities with different compounding periods.






8. The amount by which a unit of currency will grow in a year with interest on inter-est included.






9. A graphical depic-tion of a company's investment opportunities ordered from highest to lowest expected return. A company's optimal capital budget is found where the investment opportunity schedule inter-sects with the company's marginal cost of capit






10. A valuation that sums the estimated values of each of a company's busi-nesses as if each business were an independent going concern.






11. A contract in which one party has the right to claim a payment from another party in the event that a specific credit event occurs over the life of the contract.






12. The strategy a company fol-lows with regard to the amount and timing of div-idend payments.






13. Asset inflows not directly related to the ordi-nary activities of the business.






14. A swap in which the floating payments have an upper limit.






15. The rate of dividend (and earnings) growth that can be sustained over time for a given level of re turn on equity - keeping the capi tal structure constant and wi thout issuing addi tional common stock.






16. 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.






17. Serial correlation in which a positive e rror for one observation increases the chance of a negative error for another observation - and vice versa.






18. Any action other than a tariff that restricts international trade.






19. An amount or percent-age deducted from the pro rata share of 100 per-cent of the value of an equity interest in a business to reflect the absence of some or all of the powers of control.






20. A merger involving companies at different positions of the same production chain; for example - a supplier or a distributor.






21. The process of determining the value of an asset or service on the basis of variables per-ceived to be related to future investment returns - or on the basis of comparisons with closely similar assets.






22. The period benefited~y the employee's service - usually th e period between the grant date and the vesting date.






23. The process of using an option to buy or sell the underlying.






24. The relationship between option price and volatility.






25. The portion of an entity's income that is subject to income taxes under the tax laws of its jurisdiction.






26. An experiment that can produce one of two outcomes.






27. A loan that is secured with com-panyassets.






28. Dummy variables used as dependent variables rather than as inde-pendent variables.






29. A specialized computer program or a spreadsheet that solves for the portfolio weights that will result in the lowest risk for a specified level of expected return.






30. A solvency ratio calculated as total debt divided by total assets.






31. The establishment of objectives for individuals - groups - or divisions of an organiza-tion that takes into account the allocation of an acceptable level of risk.






32. The portion of the dependent variable that is not explained by the independent vari-able(s) in the regression.






33. A potential business combina-tion that is endorsed by the managers of both companies.






34. An approach to investment analysis and security selection.






35. Quantiles that divide a distribution into 10 equal parts.






36. An acceler-ated depreciation method that involves depreciat-ing the asset at double the straight-line rate. This rate is multiplied by the book value of the asset at the beginning of the period (a declining balance) to calculate depreciation expense.






37. CMT A hypothetical U.S. Treasury note with a constant maturity. A CMT exists for various years in the range of 2 to






38. Division ofnet operating income by an overall capitalization rate to arrive at market value.






39. The contribution to active risk squared resulting from the portfolio's different-than-benchmark exposures relative to factors specified in the risk model.






40. A third party that is sought out by the target company's board to purchase the target in lieu of a hostile bidde .






41. The condition of being of sufficient importance so that omission or misstatement of the item in a financial report could make a differ-ence to users' decisions.






42. Costs (e.g. - executives' salaries) that cannot be directly matched with the timing of rev-enues and which are thus expensed immediately.






43. The number of indepen-dent observations used.






44. Costs of inven tories including costs of purchase - costs of conversion - other costs to bring the inventories to their present location and condition - and the allocated portion of) fixed production overhead costs.






45. A statistical model used to clas-sifY borrowers according to creditworthiness.






46. 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.






47. A widely used approach to estimate an overall capitalization rate. It is based on the premise that debt and equity financ-ing is typically involved in a real estate transaction.






48. The sum of market value of common equity - book value of preferred equity - and face value of debt.






49. An option in which the asset underlying the futures is a commodity - such as oil - gold - wheat - or soybeans.






50. A solvency ratio calculated as EBIT divided by interest payments.