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Test your basic knowledge |
CFA Level2 Vocab
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Subjects
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
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 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
Exchange rate
Kurtosis
Covered interest arbitrage
Reputational risk
2. A quantity - calculated based on a sam-ple - whose value is the basis for deciding whether or not to reject the null hypothesis.
Negative serial correlation
Covariance matrix
Test statistic
Cost of carry
3. 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
Paired comparisons test
Cost of debt
Band-of-investment method
Special purpose entity (special purpose vehicle or variable interest entity)
4. The amount of dispersion rela-tive to a reference value or benchmark.
Top-down investing
Relative dispersion
Priced risk
Termination date
5. The error of rejecting a true null hypothesis.
Type I error
Forward contract
Terminal price multiple
Asset retirement obligations (AROs)
6. With reference to a random vari-able - the property of having characteristics such as mean and variance that are not constant through time.
Sample standard deviation
Mismatching strategy
Nonstationarity
IRR rule
7. The risk associated with the pos-sibility that a payment due at a later date will not be made.
Asset beta
Potential credit risk
Effective annual rate
Cash-flow-statement-based accruals ratio
8. Resources controlled by an enterprise as a result of past events and from which future eco-nomic benefits to the enterprise are expected to flow.
Breusch-Pagan test
Diluted shares
Assets
After-tax equity reversion (ATER)
9. A strategic corporate goal repre-senting the long-term proportion of earnings that the company intends to distribute to shareholders as dividends.
Valuation allowance
Target payout ratio
Mismatching strategy
Leveraged recapitalization
10. The hypothesis to be tested.
Null hypothesis
Notes payable
Pull on liquidity
Enterprise value (EV)
11. A time series in which the value ofthe series in one period is the value of the series in the previous period plus an unpredictable random error.
Random walk
Number of days of payables
Precautionary stocks
Covariance matrix
12. 1) An agent who executes orders to buy orsell securities on behalf of a client in exchange for a commission. 2) See Futures commission merchants.
Broker
Float factor
Relative frequency
Income tax recoverable
13. A type of weighted mean computed by averaging the reciprocals of the ohservations - then taking the reciprocal of that average.
Purchased in-process research and development costs
Harmonic mean
Materiality
Skewed
14. A variation of VAR that reflects the risk of a company's cash flow instead of its market value.
Cash flow at risk (CFAR)
Government sector surplus or deficit
Quantile (or fractile)
Seats
15. A pre-offer takeover defense mech-anism involving the corporate charter (e.g. - stag-gered boards of directors and supermajority provisions) .
Credit-linked notes
Fiduciary call
Ratio spread
Shark repellents
16. An option strategy that is equiva-lent to a short butterfly spread.
Sandwich spread
Initial margin requirement
Creditworthiness
Segment debt ratio
17. Costs that remain at the same level regardless of a company's level of production and sales.
Semilogarithmic
Correlation analysis
Fixed costs
Put-call-forward parity
18. Estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.
Price to cash flow
Net realizable value
Frequency distribution
Bayes' formula
19. A depreciation method tHat allocates the cost of a long-lived asset based on-actual usage during the period .
Units-of-production method
Stock options (stock option grants)
Normalized
Regime
20. The market in which the currency of one country is exchanged for the cur-rency of another.
Horizontal common-size analysis
IRR rule
Foreign exchange market
VISibility
21. Unexpected earnings divided by the standard deviation of analysts' earnings forecasts.
Scaled earnings surprise
Entry price
Pooled estimate
Economic order quantity-reorder point
22. The loss in the value of an option resulting from movement of the option price toward its payoff value as the expiration day approaches.
Basic earnings per share (EPS)
Single-step format
Time value decay
Current credit risk
23. The process of allocating the cost of intangible long-term assets having a finite useful life to accounting periods; the allocation of the amount of a bond premium or discount to the periods remaining until bond maturity.
Implied repo rate
Amortization
Revaluation
Test statistic
24. The accuracy with which a company's reported financials reflect its operat-ing performance and their usefulness for forecast-ing future cash flows.
Financial reporting quality
Population
U.S. interest rate differential
First-order serial correlation
25. An annuity having a first cash flow that is paid immediately.
Log-linear model
Forward swap
Annuity due
Null hypothesis
26. An amount equal to net taxes minus government expenditure on goods and services.
Crawling peg
Government sector surplus or deficit
Systematic factors
Brokerage
27. A variation of the market approach; considers actual transactions in the stock of the subject private company.
Absolute frequency
Controlling interest
Type II error
Prior transaction method
28. The seller of a derivative contract. Also refers to the position of being short a derivative.
Out-of-the-money
Unbiasedness
Performance appraisal
Short
29. A model of intrinsic value that views the value of an asset as the present value of the asset's expected future cash flows.
Arbitrage
Declaration date
Present value model or discounted cash flow model
Generalized least squares
30. A reduction in proportional ownership inter-est as a result of the issuance of new shares.
Real GDP per person
Justified (fundamental)
Focus
Dilution
31. Factors that affect the average returns of a large number of different assets.
Economic exposure
Matching principle
Economic profit
Systematic factors
32. The cash flow that is real-ized because of a decision; the changes or incre-ments to cash flows resulting from a decision or action.
Rejection point (or critical value)
Current taxes payable
Securities Exchange Act of 1934
Incremental cash flow
33. A number between - 1 and + 1 that measures the co-movement (linear association) between two random variables.
Commodity forward
Spurious correlation
Correlation
Drag on li
34. A rate of interest based on the secu-rity's face value.
Statistically significant
Price momentum
Continuously compounded return
Nominal rate
35. Ratio of sales on credit to the average balance in accounts receivable.
Covariance
Accounts receivable turnover
Tax base (tax basis)
Band-of-investment method
36. The difference between reported net income on an accrual basis and the cash flows from operating and investing activities.
Going-concern value
Homoskedasticity
Cash-flow-statement-based aggregate accruals
Initial public offering (IPO)
37. An electronic payment system used widely in Europe and Japan.
Strategic transaction
Top-down analysis
Top-down forecasting approach
Giro system
38. Options on individual stocks; also known as stock options.
Systematic sampling
Pretax margin
Model risk
Equity options
39. Theories that posit that cor-porate executives are motivated to engage in mergers to maximize the size of their company rather than shareholder value.
Weighted-average cost of capital (WACC)
Leptokurtic
Sunk cost
Managerialism theories
40. Ratios that measure a company's ability to meet its long-term obligations.
Split-rate
Solvency ratios
Cross-sectional data
Growth investors
41. 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
Commodity forward
Futures contract
Molodovsky effect
Nonlinear relation
42. Any departure of the market price of an asset from the asset's estimated intrinsic value.
Classified balance sheet
Error autocorrelation
Mispricing
Portfolio selection/composition problem
43. The percentage of a market that a particular fi rm supplies; used as the primary measure of monopoly power.
Market approach
Market share test
Mean
Complement
44. A balance sheet asset that arises when an excess amount is paid for income taxes relative to accounting profit. The taxable income is higher than accounting profit and income tax payable exceeds tax expense. The company expects to recove r the differ
Deferred tax assets
Guideline public companies
Weighted-average cost of capital (WACC)
Principal
45. When a bankrupt company is allowed to enforce contracts that are favorable to it while walking away from contracts that are unfa-vorable to it.
Cherry-picking
Risk governance
Proxy statement
Exposure to foreign exchange risk
46. The difference between net operating assets at the end and the beginning of the period compared to the average net operating assets over the period.
Balance-sheet-based accruals ratio
Point estimate
Complement
Dividend payout ratio
47. Current market w ice divided by the most recent quarterly per-share dividend multiplied by four.
Statutory merger
Deregulation
Intergenerational data mining
Trailirig dividend yield
48. Depreciatiolil methods that allocate a relatively large proportion of the cost of an asset to the early years of the asset's useful life.
Portfolio performance attribution
Exposure to foreign exchange risk
Completed contract
Accelerated methods of depreciation
49. A model that specifies an asset's intrinsic value.
Covered interest arbitrage
Leveraged floating-rate note or leveraged floater
Absolute valuation model
Antidilutive
50. Futures contracts in which the underlying is a stock - bond - or currency.
Futures exchange
Growth option or expansion option
Sample selection bias
Financial futures