Test your basic knowledge |

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. Degree of peakedness (fatness of tails) in excess of the peakedness of the normal distribution.






2. An Activity ratio calculated as total revenue divided by average net fixed assets.






3. The number of indepen-dent observations used.






4. The average return in excess of the risk-free rate divided by the standard deviation of return; a measure of the average excess return earned per unit of standard deviation of return.






5. 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.






6. A gain in value caused bychanges in price levels. Monetary liabilities expe-rience purchasing power gains during periods ofinflation.






7. The difference between revenue and expenses; what remains after subtracting all expenses (including depreciation - interest - and taxes) from revenue.






8. Said of a por tfolio for which eco-nomic sectors are represented in the same pro-portions as in the benchmark - using market-value weights.






9. A quantity - calculated based on a sam-ple - whose value is the basis for deciding whether or not to reject the null hypothesis.






10. A theory pertaining to a company's optimal capital struc-ture; the optimal level of debt is found at the point where additional debt would cause the costs of financial distress to increase by a greater amount than the benefit of the additional tax sh






11. Activities related to obtaining or repaying capital to be used in the business (e.g. - equity and long-term debt).






12. A dividend yield based on the anticipated dividend during the next 12 months.






13. A common or underlying element with which several variables are correlated.






14. The square root of the average squared forecast error; used to compare the out-of-sample forecasting perfor-mance of forecasting models.






15. A time series regressed on its own past values - in which the independent vari-able is a lagged value of the dependent variable.






16. A stage of growth in which the com-pany reaches an equilibrium in which investment opportunities on average just earn their opportu-nity cost of capital.






17. The sum of the real risk-free interest rate and the inflation premium.






18. An activity ratio calculated as revenue divided by average total assets.






19. A matrix or square array whoseentries are covariances; also known as a variance-covariance matrix.






20. A financial covenant made in conjunction with existing debt that restricts a company's ability to incur additional debt at the same seniority based on one or more financial tests or conditions.






21. The pro-portion of the ownership of a subsidiary not held by the parent (controlling) company.






22. A measure of the co-movement (linearassociation) between two random variables.






23. A public document that provides the material facts concerning matters on which shareholders will vote.






24. The period benefited~y the employee's service - usually th e period between the grant date and the vesting date.






25. Small numbers of observations at either extreme (small or large) ofa sample.






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






27. A solvency ratio calculated as total debt divided by total shareholders' equity.






28. The evaluation of risk-adjusted performance; the evaluation of invest-ment skill.






29. 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.






30. Mean active return divided by active risk; or alpha divided by the standarddeviation of diversifiable risk.






31. Huidity When receipts lag - creating pres-sure fmm the decreased available funds.






32. The line with an inter-cept point equal to the risk-free rate that is tangent to the efficient frontier of risky assets; represents the efficient frontier when a risk-free asset is available for investment.






33. The sensitivity of the option price to the risk-free rate.






34. A reduction in the number of shares outstanding with a corresponding increase in share price - but no change to the company's underlying fundamentals.






35. A merger involving companies inthe same line of business - usually as competitors.






36. Describes a time series whenits expected value and variance are cons tan t andfinite in all periods and when its covariance withitself for a fixed number of periods in the past orfuture is constant and finite in all periods.






37. The difference between the maximum and minimum values in a dataset.






38. Factor models that combine features of more than one type of factor model.






39. The price at which an asset or liability would change hands between a willing buyer and a willing seller whe n the former is not under any compulsion to buy and the latter is not under any compulsion to sell; the price that would be received to sell






40. The condition in which supply equals demand.






41. A model of stock valuation that views intrinsic value of stock as the sum of book value per share plus the present value of the stock's expected future residual income per share.






42. Is Derivatives in which the payoffs occur if a specific event occurs; generally referred to as options.






43. A range that has a given proba-bility that it will contain the population parameter it is intended to estimate.






44. A bond in which the amount received for delivering the bond is largest com-pared with the amount paid in the market for the bond.






45. 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.






46. Heteroskedasticity in the error variance that is correlated with the values of the independent variable(s) in the regression.






47. The process of identifYing the level of risk an entity wants - measuring the level of risk the entity currently has - taking actions that bring the actual level of risk to the desired level of risk - and monitoring the new actual level of risk so tha






48. All members of a specified group.






49. The rate of return that suppliers ofcapital require as compensation for their contri-bution of capital.






50. With reference to the cash flow statement - a format for the presentation of the statement in which cash flow from operat-ing activities is shown as operating cash receipts less operating cash disburseme ts.