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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 between the transaction date and the settlement date of an asset or liability denominated in a for-eign currency.






2. A transaction in which a company buys back its own shares. Unlike stock dividends and stock splits - share repurchases use corporate cash.






3. A post-offer takeover defense mechanism that involves the assumption of a large amount of debt that is then used to finance share repurchases; the effect is to dramat-ically change the company's capital structure while attempting to deliver a value t






4. Not symmetrical.






5. With reference to investment selection processes - an approach that starts with macro selection (i.e. - identifying attractive geo-graphic segments andVor industry segments) and then addresses selection 0 the most attractive investments within those






6. Futures contracts in which the underlying is a traditional agricultural - metal - or petroleum product.






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






8. A transaction between two affiliates - an investor company and an associate company such that the associate company records a profit on its income statement. An example is a sale of inven-tory by the associate to the investor company.






9. The interest earned each period on the original investment; interest calculated on the principal only.






10. Shares that were issued and subse-quently repurchased by the company.






11. A situation in a futures market where the current futures price is greater than the current spot price for the underlying asset.






12. For accounting purposes - the spot exchange rate on the balance sheet date.






13. A poison pill takeover defense that dilutes an acquirer's ownership in a target by giv-ing other existing target company shareholders the right to buy additional target company shares at a discount.






14. A procedure used in certain deriva-tive transactions that specifies that the long and short parties engage in the equivalent cash value of a delivery transaction.






15. A permissible delivery procedure used by futures market participants - in which the long and short arrange a delivery pro-cedure other than the normal procedures stipu-lated by the futures exchange.






16. The relationship between the option price and the underlying price - which reflects the sensi-tivity of the price of the option to changes in the price of the underlying.






17. An annuity with a first cash flow that is paid one period from the present.






18. A quantitative restriction on the import of a particular good - which specifies the maximum amount that can be imported in a given time period.






19. The seller of a derivative contract. Also refers to the position of being short a derivative.






20. Options originally created with expirations of sev-eral years.






21. The process of valuing long-lived assets at fair value - rather than at cost less accumulated depreciation. Any resulting profit or loss is either reported on the income statement and/or through equity under revaluation surplus.






22. 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.






23. A rule that states that the number of years it takes for the level of a variable to double is approximately 70 divided by the annual percent-age growth rate of the variable.






24. An option strategy involving the purchase of one option and sale of another option that is identical to the first in all respects except either exercise price or expiration.






25. A measure of the time needed to convert raw materials into cash from a sale; it con-sists of the number of days of inventory and the number of days of receivables.






26. Assets that can be most readily con-verted to cash (e.g. - cash - short-term marketable investments - receivables) .






27. A financial statement that reconciles the beginning-of-period and end-of-period balance sheet values of shareholders' equity; provides information about all factors affecting shareholders' equity.

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28. The ability to terminate a proj-ect at some future time if the financial results are disappointing.






29. Ratios that measure a company's ability to generate profitable sales from its resources (assets).






30. The amount of money that a trader deposits in a margin account. The term is derived from the stock market practice in which an investor bor-rows a portion of the money required to purchase a certain amount of stock. In futures markets - there is no b






31. Aka 'Market efficiency. '






32. A function that specifies the probability that the random variable takes on a specific value.






33. A reduction in proportional ownership inter-est as a result of the issuance of new shares.






34. An equation describing the expected return on any asset (or portfolio) as a linear function of its beta relative to the market portfolio.






35. Revenue after adjustments (e.g. - for estimated returns or for amounts unlikely to be collected).






36. The difference between reported earnings per share and expected earnings per share.






37. The periodic investment of a fixed amount of money.






38. A normal operating expense that has been paid in advance of when it is due.






39. A trader who offers to buy or sell futures contracts - holding the position for only a brief period of time. Scalpers attempt to profit by buy-ing at the bid price and selling at the higher ask price.






40. A form of restructuring that involves the creation of a new legal entity and the sale of equity in it to outsiders.






41. Public-company com-parables for the company being valued.






42. Independent projects are projects whose cash flows are independent ofeach other.






43. A solvency ratio calculated as total debt divided by total debt plus total share-holders ' equi ty.






44. A rule explaining the expected value of a random vari-able in terms of expected values of the random variable conditional on mutually exclusive and exhaustive scenarios.






45. Research and development costs relating to projects that are not yet completed - such as have been incurred by a company that is being acquired.






46. CMT swap A swap in which the floating rate is the rate on a security known as a constant maturity treasury or CMT security.






47. An option that gives the holder the right to sellan underlying asset to another party at a fixedprice over a specific period of time.






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






49. The difference between the actual value per share and the no-growth value per share.






50. A type of qualitative variable that takes on a value of 1 if a particular condition is true and 0 if that condition is false.