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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. A money measure of the goods and services produced within a country's borders over a stated time period.
Tie-in sales
White-corrected standard errors
Gross domestic product
Identifiable intangible
2. A distribution that specifies the probabilities of a random variable's possible outcomes.
Noncurrent
Versioning
Active risk squared
Probability distribution
3. An option that gives the holder the right to buy an underlying asset from another party at a fixed price over a specific period of time.
Call
Interest rate cap or cap
Direct write-off method
Joint probability
4. Assets and liabilities with value equal to the amount of currency con-tracted for - a fixed amount of currency. Examples are cash - accounts receivable - mortgages receiv-able - accounts payable - bonds payable - and mort-gages payable. Inventory is
White-corrected standard errors
Monetary assets and liabilities
Yield to maturity
Independent
5. A basis for reporting investment income in which the investing entity recognizes a share of income as earned rather than as divi-dends when received. These transactions are typi-cally reflected in Investments in Associates or Equity Method Investment
Random variable
Time-weighted rate of return
Equity method
Cash settlement
6. The positive square root of semivari-ance (sometimes called semistandard deviation) .
Minimum-variance portfolio
Matching strategy
Semideviation
Required rate of return
7. An extra return that compen-sates investors for the possibility that the borrower will fail to make a promised payment at the con-tracted time and in the contracted amount.
Net asset balance sheet exposure
Present value model or discounted cash flow model
Growth option or expansion option
Default risk premium
8. Expectations that differfrom consensus expectations.
Quick assets
Differential expectations
Operating leverage
Bottom-up investing
9. A listing in which tile order of tile listed items does not matter.
Combination
Temporal method
Compiled f'mancial statements
Earnings management activity
10. Mean active return divided by active risk; or alpha divided by the standarddeviation of diversifiable risk.
Enhanced derivatives products companies (EDPC)
Exit price
Information ratio (IR)
Days of inventory on hand (DOH)
11. Said of a sale in which proceeds are to be paid in installments over an extended period of time.
Taxable temporary differences
P Value
Installment
Price to book value
12. Debt with the added feature that the bondholder has the option to exchange the debt for equity at prespecified terms.
Linear trend
Convertible debt
Prior transaction method
Translation exposure
13. The minimum real wage rate needed to maintain life.
Subsistence real wage rate
Top-down analysis
Shareholders' equity
Bernoulli random variable
14. The income tax owed by the company on the basis of taxable income.
Equity method
Capture hypothesis
Income tax payable
Derivatives dealers
15. The quality of being relatively unaffected by a violation of assumptions.
Robust
Risk premium
Ordinary annuity
Arrears swap
16. The rate at which an option's time value decays.
Theta
Sector rotation strategy
Centralization permits economies of scale and allows a company to use some of its risks to offset other risks.
Liquidation
17. 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.
Point of sale
Sovereign yield spread
Income tax recoverable
Leveraged buyout (LBO)
18. Costs of research and development in progress atan acquired company; often - part of the purchaseprice of an acquired company is allocated to suchcosts.
Mean-variance analysis
Purchased in-process research and development costs
Termination date
Debt incurrence test
19. A merger involving companies inthe same line of business - usually as competitors.
Periodic rate
Horizontal merger
Underlying earnings (or persistent earnings - continu-ing earnings - or core earnings)
U.S. official reserves
20. 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) .
Stratified random sampling
Active investment managers
Dead-hand provision
Time series
21. A general strategy usually thought of as reducing - if not eliminating - risk.
Growth investors
Direct write-off method
Estimation
Hedging
22. The rate demanded by purchasers of bonds - given the risks associated with future cash payment obligations of the particular bond issue.
Market rate
Cash equivalents
Income tax payable
Deductible temporary differences
23. Weights that are used to compute a binomial option price. They are the probabilities that would apply if a risk-neutral investor valued an option.
Going-concern assumption
Cost structure
Homogenization
Risk-neutral probabilities
24. Theories that posit that cor-porate executives are motivated to engage in mergers to maximize the size of their company rather than shareholder value.
Survey approach
Managerialism theories
Losses
Hedge ratio
25. The date on which a derivative con-tract expi res.
Expiration date
Portfolio selection/composition problem
Standard deviation
Price to book value
26. Controlling additional property throughreinvestment - refinancing - and exchanging.
Diffuse prior
Cash ratio
Pyramiding
Credit scoring model
27. The owners' remaining claim on the company's assets after the liabilities are deducted.
Estimation
Absolute frequency
Residual claim
Component cost of capital
28. An approach to using price multiples that relates a price multiple to forecasts of fundamentals through a discounted cash flow model.
Method based on forecasted fundamentals
Opportunity set
Total return swap
Commodity futures
29. A variation of a forward contract that has essentially the same basic definition but with some additional features - such as a clearing-house guarantee against credit losses - a daily settlement of gains and losses - and an organized electronic or fl
White knight
Unclassified balance sheet
Futures contract
Controlling interest
30. Probabilities reflecting beliefs prior to the arrival of new information.
Population variance
Prior probabilities
Gross income multiplier (GIM)
Termination date
31. Analysis that involves com-parisons across individuals in a group over a given time period or at a given point in time.
Trade-weighted index
Cross-sectional analysis
Geometric mean
Creative response
32. An observation drawn from a uni-form distribution.
Portfolio performance attribution
Random number
Income
Volatility
33. The analyst'S estimate of a stock's value at a particular point in the future .
Constant maturity treasury or
Reorganization
Terminal value of the stock (or continuing value of the stock)
Cash equivalents
34. With reference to events - the propertythat the occurrence of one event does not affect the probability of another event occurring.
Independent
Enterprise value (EV)
Purchase method
Credit risk or default risk
35. 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
Cash equivalents
Nontariff barrier
Fixed exchange rate
Collar
36. Agency costs that are incurred despite adequate monitoring and bonding of management.
Buy-side analysts
Cost of capital
Residual loss
Clean surplus relation
37. In accounting contexts - cash on hand (e.g. - petty cash and cash not yet deposited to the bank) and demand deposits held in banks and similar accounts that can be used in payment of obligations.
Market-extraction method
Cash
Reconciliation
Flip-over pill
38. 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
Float factor
Mean excess return
Population mean
39. Potential future payments to the seller that are contingent on the achieve-ment of certain agreed on occurrences.
Contingent consideration
Bernoulli trial
Settlement risk
Safety-first Rules
40. 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).
Blockage factor
FIFO method
Corporate raider
Time value or speculative value
41. A tabular display of data summarized into a relatively small number of intervals.
Frequency distribution
Information ratio (IR)
Sum-of-the-parts valuation
Reputational risk
42. An activity ratio calculated as purchases divided by average trade payables.
Robust
Payables turnover
Labor productivity
Aging schedule
43. Analysis that shows the changes in key financial quantities that result from given (economic) events - such as the loss of customers - the loss of a supply source - or a catastrophic event; a risk management technique involving examina-tion of the pe
Active factor risk
Economic exposure
Option
Scenario analysis
44. Options that - if exercised - would require the payment of more money than the value received and therefore would not be cur-rently exercised.
Due diligence
Terminal price multiple
Out-of-the-money
Upstream
45. 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.
Minority passive investments (passive investments)
Book value equity per share
Analysis of variance (ANOVA)
Held-for-trading securities (trading securities)
46. The amount available for fixed costs and profit after paying variable costs; rev-enue minus variable costs.
Held-for-trading securities (trading securities)
One-sided hypothesis test (or one-tailed hypothesis test)
Contribution margin
Point estimate
47. Provision for a return of invest-ment - net of value appreciation.
Top-down investing
Recapture premium
Delta hedge
Cash-generating unit
48. (Aka forward rate agreement)
Warehouse receipt arrangement
Mispricing
Interest rate forward
Growth investors
49. A transaction executed inthe foreign exchange market in which a currencyis purchased (sold) and a forward contract is sold(purchased) to lock in the exchange rate forfuture delivery of the currency. This transactionshould earn the risk-free rate of t
Recapture premium
Pooled estimate
Covered interest arbitrage
Unearned revenue (deferred revenue)
50. A varia-tion ofVAR that reflects credit risk.
Accumulated depreciation
Priced risk
Credit VAR - default VAR - or credit at risk
Days of sales outstanding (DSO)