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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. The government's holding of foreign cun; - e.!}cy.
Winner's curse
U.S. official reserves
Operating leverage
Statement of cash flows (cash flow statement)
2. Sales minus the cost of sales ~.e . - the cost of goods sold for a manufactur-ing cOlp pany) .
Comparables (comps - guideline assets - guideline com-panies)
Hedge ratio
Gross profit (gross margin)
Compounding
3. The risk that portfolio value will fall below some minimum acceptable level over some time horizon.
Expectational arbitrage
Target semideviation
Duration
Shortfall risk
4. A purchase involving a buyer having essentially no material synergies with the target (e.g. - the purchase of a private company by a company in an unrelated industry or by a private equity firm would typically be a financial transaction) .
Financial transaction
Takeover
Fixed charge coverage
Double declining balance depreciation
5. A model for pncmg futurescontracts in which the futures price is determinedby adding the cost of carry to the spot price.
Cost of carry model
Relative strength (RSTR) indicators
Disbursement float
Relative valuation models
6. Asset outflows not directly related to the ordi-nary activities of the business.
Losses
Long-term equity anticipatory securities (LEAPS)
Univariate distribution
Generalized least squares
7. The smaller the stake that managers have in the company - the less is their share in bearing the cost of excessive perquisite consumption or not giving their best efforts in running the company.
Contribution margin
Agency costs of equity
Bond-equivalent yield
Interest rate call
8. A swap in which the floating payments have a lower limit.
Floored swap
Efficient frontier
Growth phase
Degree of total leverage
9. With reference to a random vari-able - the property of having characteristics such as mean and variance that are not constant through time.
Focus
Nonstationarity
Replacement value
Transaction exposure
10. Shares that were issued and subse-quently repurchased by the company.
Treasury shares
Net operating cycle
Recapture premium
Lack of marketability discount
11. Individuals or companies b hat execute fu tures transactions for other parties off the exchange.
Scaled earnings surprise
Futures commission merchants (FCMs)
Sensitivity analysis
Surprise
12. A si gle numerical estimate of an unknown quantity - such as a population parameter.
Subjective probability
Point estimate
If-converted method
Measure of location
13. A rule explaining the uncon-ditional probability of an event in terms of proba-bilities of the event conditional on mutually exclusive and exhaustive scenarios.
Total probability rule
Ex-dividend
Transaction exposure
Defined-benefit pension plans
14. A country that is borrowing more from the rest of the world than it is lending to it.
Spin-off
Potential credit risk
Definitive merger agreement
Net borrower
15. The quantity of goods and services that a country exports to pay for its imports of goods and services.
Agency relationships
Nominal exchange rate
Terms of trade
Liruit down
16. Research and development costs relating to projects that are not yet completed - such as have been incurred by a company that is being acquired.
Active risk
In-process research and development
Industry structure
Cost of carry model
17. The analysis of the total variability of a dataset (such as observations on the dependent variable in a regression) into components representing different sources of variation; with reference to regression - ANOVA provides the inputs for an F-test of
Analysis of variance (ANOVA)
Accounting risk
Corporate governance
Financing activities
18. The price received to sell an asset or trans-fer a liability.
Leading
Company fundamental factors
Sales risk
Exit price
19. Cash-settled for-ward contracts - used predominately with respect to foreign exchange forwards.
Buy-side analysts
Interval
Nondeliverable forwards (NDFs)
Simple random sample
20. A forecasting process in which the next period's value as predicted by the forecasting equation is substituted into the right-hand side of the equation to give a predicted value two periods ahead.
Chain rule of forecasting
Unidentifiable intangible
Simple interest
Financial distress
21. The amount by which the takeover price for each share of stock must exceed the current stock price in order to entice shareholders to relinquish control of the com-pany to an acquirer.
Mark-ta-market
Takeover premium
Perfect collinearity
Cash flow at risk (CFAR)
22. The extent to which a company's operations are predictable with substantial confidence.
Financial flexibility
Projected unit credit method
VISibility
Paired comparisons test
23. A procedure of selecting every kth member until reaching a sample of the desired size. The sample that results from this procedure should be approximately random.
Sovereign yield spread
Price to sales
Discount for lack of marketability
Systematic sampling
24. With the accounting systems - a formal record of increases and decreases in a specific asset - liability - component of owners' equity - rev-enue - or expense.
ecurity market line (SML)
Account
Weighted average cost method
Segment debt ratio
25. The owners of a joint venture. Each is active in the management and shares control of the joint venture.
Pure-play method
Grouping by function
Venturers
Capital structure
26. The principles governing equivalence relationships between cash flows with different dates.
Time value of money
Inverse floater
Market share test
Focus
27. Behavior on the part of a firm that allows it to comply with the letter of the law but violate the spirit - significantly lessening the law's effects.
One-sided hypothesis test (or one-tailed hypothesis test)
Going-concern value
Orthogonal
Creative response
28. Income as reported on the income statement - in accordance with prevailing account-ing standards - before the provisions for income tax expense.
Accounting profit (income before taxes or pretax income)
Agency problem - or principal-agent problem
Hostile transaction
Other comprehensive income
29. Correlation between adj acent observations in a time ser ies.
Unit root
First-order serial correlation
Alpha (or abnormal return)
Cost of carry
30. The relationship of the quantity of an asset being hedged to the quantity of the deriva-tive used for hedging.
Efficient frontier
Hedge ratio
Descriptive statistics
Operating return on assets (operating
31. A number between - 1 and + 1 that measures the co-movement (linear association) between two random variables.
Nominal exchange rate
Correlation
Put-call-forward parity
Objective probabilities
32. An exchange rate is deter-mined by demand and supply with no direct inter-vention in the foreign exchange market by the central bank.
Floor
Guideline public company method
Economic value added (EVA)
Flexible exchange rate
33. Segment liabilities divided by segment assets.
Volatility
Commodity option
Accounting profit (income before taxes or pretax income)
Segment debt ratio
34. Aka 'Market efficiency.
Trust receipt arrangement
Traditional efficient markets formulation
Exp ected holding-period return
Scalper
35. The study of how data can besummarized effectively.
Current account
Null hypothesis
Sample variance
Descriptive statistics
36. Analysts who work for investment management fi rms - trusts - a d bank trust depart-ments - and similar institutions.
Potential credit risk
Target balance
Buy-side analysts
Scalper
37. The expected return on an invest-ment minus the risk-free rate.
Mixed factor models
Risk premium
Carried interest
Exercise rate or strike rate
38. Agreements made by a company in bankruptcy under which a company's capital struc-ture is altered and/ or alternative arrangements are made for debt repayment; U.S. Chapter II bankruptcy. The company emerges from bank-ruptcyas a going concern.
Power of a test
Reorganization
Forward dividend yield
Pooling of interests accounting method
39. A quoting convention that annualizes - on a 360-day year - the discount as a percentage of face value.
Differential expectations
Spread
Bank discount basis
Hedging
40. In the context of the Treynor-Black model - the portfolio formed by mixing analyzed stocks of perceived nonzero alpha values. This portfolio is ultimately mixed with the passive mar-ket index portfolio.
Active portfolio
Free cash flow to the
At the money
Financial transaction
41. Company growth in output or sales that is achieved by buying the necessary resources externally (i.e. - achieved through mergers and acquisitions) .
External growth
Continuously compounded return
Log-linear model
Paired comparisons test
42. The condition in futures markets in which futures prices are lower than expected spot prices.
Long-term debt-ta-assets ratio
Rational efficient markets formulation
Underlying
Normal backwardation
43. CAPM An adaptation of the CAPM that adds to the CAPM a premium for small size and company-specific risk.
Combination
Expanded
Foreign currency transactions
Constant maturity swap or
44. A sample measure of the degree of dispersion of a distribution - calculated by dividing the sum of the squared deviations from the sam-ple mean by the sample size minus 1.
Unearned revenue (deferred revenue)
Sample variance
Economic order quantity-reorder point
Structured note
45. The ability to make additional investments in a project at some future time if the financial results are strong.
Grouping by nature
Growth option or expansion option
Revolving credit agreements
Earnings at risk (EAR)
46. Earnings adjusted for nonrecur-ring - non-economic - or other unusual items to elim-inate anomalies andlor facilitate comparisons.
Direct format (direct method)
Variation margin
Normalized earnings
Unlimited funds
47. The currency of the primary economic environment in which an entity operates.
Benchmark
Functional currency
Net operating assets
No-growth value per share
48. The rate of return from a cash-and-carry transaction implied by the futures price relative to the spot price.
Unconditional probability (or marginal probability)
Implied repo rate
Terminal price multiple
Permutation
49. A matrix or square array whoseentries are covariances; also known as a variance-covariance matrix.
Unexpected earnings (also earnings surprise)
Futures commission merchants (FCMs)
Payout ratio
Covariance matrix
50. A rate of interest based on the secu-rity's face value.
Top-down analysis
Contingent consideration
Nominal rate
Net operating assets