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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. A system that allows individual units within an organization to manage risk. Decentralization results in duplication ofeffort but has the advantage of having people closer to the risk be more d irectly involved in its management.






2. The probability of correctly rejecting the null-that is - rejecting the null hypothesis when it is false.






3. A general strategy usually thought of as reducing - if not eliminating - risk.






4. 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.






5. A probability based on logical analysis rather than on observation or personal judgment.






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






7. A procedure for determining the interest on a loan or bond in which the interest is deducted from the face value in advance.






8. The quoted interest rate per period; the stated annual interest rate divided by the number of compounding periods per year.






9. In using the method of com parables - the value of a price mul-tiple for the comparison asset; when we have com-parison assets (a group) - the mean or median value of the multiple for the group of assets.






10. The difference between the fixed rate on an interest rate swap and the rate on a Trea-sury note with equivalent maturity; it reflects the general level of credit risk in the market.






11. A measurement scale that has all the characteristics of interval measurement scales as well as a true zero point as the origin.






12. A si gle numerical estimate of an unknown quantity - such as a population parameter.






13. The difference between the yield on a bond and the yield on a default-free security - usu-ally a government note - of the same maturity. The yield spread is primarily determined by the mar-ket's perception of the credit risk on the bond.






14. An unlimited funds environment assumes that the company can raise the funds it wants for all profitable projects simply by paying the required rate of return.






15. The number of shares that would beoutstanding if all potentially dilutive claims oncommon shares (e.g. - convertible debt - convert-ible preferred stock - and employee stock options)were exercised.






16. The accounting principle that expenses should be recognized when the associ-ated revenue is recognized.






17. A diagram with branches emanating from nodes representing either mutually exclu-sive chance events or mutually exclusive decisions.






18. A non-operating entity created to carry out a specified purpose - such as leasing assets or securitizing receivables; can be a corporation - partnership - trust - limited liability - or partnership formed to facilitate a specific type of business act






19. An amount equal to net taxes minus government expenditure on goods and services.






20. The expected return on an invest-ment minus the risk-free rate.






21. The hypothesis accepted when the null hypothesis is rejected.






22. With respect to the format of the income statement - a format that presents a subtotal for gross profit (revenue minus cost of goods sold).






23. The annual return that an investor earns on a bond if the investor purchases the bond today and holds it until maturity.






24. Assets and liabili-ties that are not monetary assets and liabilities. Nonmonetary assets include inventory - fixed assets - and intangibles - and nonmonetary liabili-ties include deferred revenue.






25. Any outcome or specified set of outcomes of a random variable.






26. The risk that govern-mental laws and regulations directly or indirectly affecting a company's operations will change with potentially severe adverse effects on the com-pany's continued profitabiliny and even its long-term sustainability.






27. A payment system in which cus-tomer payments are mailed to a post office box and the banking institution retrieves and deposits these payments several times a day - enabling the company to hav use of the fund sooner than in a centralized system in wh






28. Changes to equity that bypass (are not reported in) the income statement; the diffe rence between comprehensive income and net income.






29. A continuous - symmetric prob-ability distribution that is completely described by its mean and its variance.






30. The combination of the underlying - puts - calls - and risk-free bonds that replicates a forward contract.






31. A graphical representa-tion of the expected return and risk of all portfo-lios that can be formed using two assets.






32. Segment profit (loss) divided by seg-ment assets.






33. A spontaneous form of credit in which a purchaser of the goods or service is financing its purchase by delaying the date on which payment is made.






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






35. An approach to investment analysis and security selection.






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






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






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






39. The number of units pro-duced and sold at which the company's operating profit is zero (revenues = operating costs).






40. The feature of a futures contract giv-ing the short the right to make decisions about what - when - and where to deliver.






41. Aka Harmonic mean.






42. The ratio of the percentage change in net income to the percent-age change in operating income; the sensitivity ofthe cash flows available to owners when operating income changes.






43. Reward-to-volatility ratio; ratio of portfolio excess return to standard deviation.

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44. A financial statement that reconciles beginning-of-period and end-of-period balance sheet values of cash; provides information about an entity's cash inflows and cash outflows as they pertain to oper-ating - investing - and financing activities.






45. A descriptive measure computed from or used to describe a population of data - convention-ally represented by Greek letters.






46. Real CDP divided by the population.






47. For data grouped into intervals - the fraction of total observations that are less than the value of the upper limit of a stated interval.






48. The fixed price or rate at which the transaction scheduled to occur at the expiration of a forward contract will take place. This price is agreed on at the initiation date of the contract.






49. A financial statement that reconciles beginning-of-period and end-of-period balance sheet values of cash; consists of three parts: cash flows from oper-ating activities - cash flows from investing activities - and cash flows from financing activities






50. Assets that are expected to bene-fit the company over an extended period of time (usually more than one year).