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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. Any test (or procedure) concerned with parameters or whose validity depends on assumptions concerning the population generat-ing the sample.
Parametric test
Simulation
Installment method (installment-sales method)
Future value (FV)
2. A statistical model used to clas-sifY borrowers according to creditworthiness.
Dividends per share
Credit scoring model
Operating return on assets (operating
Present value (PV)
3. Valuation indi-cators that compare a stock's performance during a period either to its own past performance or to the performance of some group of stocks.
Linear trend
Cointegrated
Holding period yield (HPy)
Relative strength (RSTR) indicators
4. An event or piece of information that causes the marketplace to re-evaluate the prospects of a company.
Catalyst
Net borrower
Versioning
Ope ating profit margin (operating margin)
5. An option strategy involving the purchase of one option and sale of another option that is identical to the first in all respects except either exercise price or expiration.
Trade receivables (commercial receivables or accounts receivable)
Regulatory risk
Spread
Bernoulli trial
6. A variation of VAR that reflects the risk of a company's cash flow instead of its market value.
Cash flow at risk (CFAR)
Sample skewness
Vested benefits
Risk-neutral valuation
7. The return on a portfolio minus the return on the portfolio's benchmark.
Cost structure
Leading
Percentage-of-completion
Active return
8. When disbursements are paid tooquickly or trade credit availability is limited -requiring companies to expend funds beforethey receive funds from sales that could cover theliability.
Functional currency
Pull on liquidity
Down transition probability
White-corrected standard errors
9. A floating-rate note or bond in which the coupon is adjusted to move opposite to a benchmark interest rate.
Inverse floater
Liquidity discount
Subsistence real wage rate
Defensive interval ratio
10. When parties agree to exchange only the net amount owed from one party to the other.
Projected benefit obligation
Operating leverage
Degree of financial leverage (DFL)
Netting
11. Also called present value of a basis point or price value of a basis point (PVBP) - the change in the bond price for a I basis point change in yield.
Weighted-average cost of capital (WACC)
Covered interest arbitrage
LIFO method
Basis point value (BPV)
12. The probability of an event estimated as a relative frequency of occurrence.
Growth phase
Fundamental beta
Reviewed fmancial statements
Empirical probability
13. The contribution to active risk squared resulting from the portfolio's different-than-benchmark exposures relative to factors specified in the risk model.
Corporation
Active factor risk
Deciles
Indirect format (indirect method)
14. A distribution that specifies the probabilities of a random variable's possible outcomes.
Index option
Profitability ratios
Probability distribution
Available-for-sale investments
15. 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.
Residual income model (RIM) (also discounted ahnormal earnings model or Edwards-Bell-Ohlson model)
American
Statement of changes in shareholders' equity (state-ment of owners' equity)
Target payout ratio
16. A measure of th e yield on the undel~ ing bond of a futures contract implied by pricing it as though the underlying will be delivered at the futures expiration.
Project sequencing
Implied yield
Held-for-trading securities (trading securities)
Capital budgeting
17. An indicator of profitability - calculated as net income divided by revenue; indicates how much of each dollar of revenues is left after all costs and expenses.
Capture hypothesis
Bernoulli trial
Net profit margin (profit margin or return on sales)
Present (price) value of a basis point (PVBP)
18. 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
Current account
Analysis of variance (ANOVA)
Dividend payout ratio
Frequency distribution
19. To reduce the value of a future payment in allowance for how far away it is in time; to calcu-late the present value of some future amount. Also - the amount by which an instrument is priced below its face value.
Put-call-forward parity
Discount
Pairs arbitrage trade
Safety-first Rules
20. The price of a security with accrued interest.
Retail method
Constant maturity swap or
Full price
Debt rating approach
21. An inventory account-ing method that identifies which specific inventory items were sold and which remained in inventory to be carried over to later periods.
Specific identification method
Horizontal merger
Growth phase
Qualifying special purpose entities
22. 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.
Chain rule of forecasting
Locked limit
Ex-dividend
Cheapest to deliver
23. A sample measure of the degree of a distribution's peakedness.
Conditional heteroskedasticity
Contribution margin
Mixed factor models
Sample kurtosis
24. Approach to translating for-eign currency financial statements for consolida-tion in which all assets and liabilities are translated at the current exchange rate. The cur-rent rate method is the prevalent method of translation.
Current rate method
Event
Revolving credit agreements
Debit
25. The differential of infor-mation between corporate insiders and outsiders regarding the company's performance and prospects. Managers typically have more informa-tion about the company's performance and prospects than owners and creditors.
Government sector surplus or deficit
Trading securities (held-for-trading securities)
Standardizing
synunetric information
26. A subset of a population.
Sample
Declaration date
Default risk premium
Time series
27. The process of accumulating interest on interest.
Compounding
Premise of value
Segment debt ratio
Fixed-income forward
28. A graphical depic-tion of a company's investment opportunities ordered from highest to lowest expected return. A company's optimal capital budget is found where the investment opportunity schedule inter-sects with the company's marginal cost of capit
Investment opportunity schedule
Operating cycle
Hurdle rate
Foreign currency
29. The residuals from a fitted time-series model within the sample period used to fit the model.
Pyramiding
Orthogonal
Accounting risk
In-sample forecast errors
30. Aka 'Market efficiency. '
Interest rate
Rational efficient markets formulation
Passive portfolio
Financial reporting quality
31. A measure of dispersion relat-ing to a population - calculated as the mean of the squared deviations around the population mean.
Dead-hand provision
Population variance
Interest rate put
Proxy statement
32. A condition in the futures markets in which the benefits of holding an asset exceed the costs - leaving the futures price less than the spot price.
Priced risk
ackwardation
Annual percentage rate
Regression coefficients
33. In reference to assets - the amount paid to purchase an asset - including any costs of acquisition and! or preparation; with reference to liabilities - the amount of proceeds received in exchange in issuing the liability.
Gamma
Payoff
Historical cost
Direct write-off method
34. European option An option contract that can only be exercised on its expiration date.
Capital allocation line (CAL)
Antidilutive
European-style option or
Accrued interest
35. The system of principles - policies - procedures - and clearly defined responsi-bilities and accountabilities used by stakeholders to overcome the conflicts of interest inherent in the corporate form.
Corporate governance
Flip-over pill
Leveraged floating-rate note or leveraged floater
Grouping by function
36. With reference to investmentselection processes - an approach that involves selection from all securities within a specified investment universe - i.e. - without prior narrowiNg of the universe on the bas' s of macroeconomj c or overall market consid
Spread
Centralized risk management or companywide risk management
Flip-in pill
Bottom-up analysis
37. Segment revenue divided by seg-ment assets .
Segment turnover
Number of days of inventory
Percentiles
Sector rotation strategy
38. The expected excess return on the market over the risk-free rate.
Exports
Market risk premium
Inverse price ratio
Exchange ratio
39. 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.
Debt incurrence test
Degree of total leverage
Economic growth rate
Safety-first Rules
40. A type of non-audited financial statements; typically provide an opinion letter with representations and assurances by the reviewing accountant that are less than those in audited financial statements.
Reviewed fmancial statements
Legal risk
Direct sales-comparison approach
In-sample forecast errors
41. The sale by a foreign firm of exports at a lower price than the cost of production.
Component cost of capital
Abandonment option
Portfolio implementation problem
Dumping
42. A breakdown of accounts into cate-gories of days outstanding.
Contingent consideration
Aging schedule
Takeover premium
Stock-out losses
43. The annual return that an investor earns on a bond if the investor purchases the bond today and holds it until maturity.
Annuity
Yield to maturity
Debt-to-equity ratio
Sampling distribution
44. An offset to accounts receivable for the amount of accounts receivable that are estimated to be uncollectible.
Caplet
Out-of-sample forecast errors
Allowance for bad debts
Conditional heteroskedasticity
45. Computer-generated sensitivity or sce-nario analysis that is based on probability models fo r the factors that drive outcomes.
Simulation
Factor
Residual income method (or excess earnings method)
Statement of changes in shareholders' equity (state-ment of owners' equity)
46. A theory of regulatory behavior that holds that regulators must take account of the demands of three groups: legislators - who established and oversee the regulatory agency; firms in the regulated industry; and consumers of the regulated indus-try's
European-style option or
Definitive merger agreement
Backward integration
Share-the-gains - share-the-pains theory
47. With reference to equity investors - investors whose investment disciplines cannot be clearly categorized as value or growth.
Entry price
Days of sales outstanding (DSO)
Comprehensive income
Market-oriented investors
48. Income approach that values an asset based on estimates of future cash flows discounted to present value by using a discount rate reflective of the risks associated wi th the cash flows.
Sandwich spread
Mutually exclusive projects
Bernoulli random variable
Free cash flow method
49. Sales on a bill-and-hold basis involve selling products but not delivering those products until a later date.
Standardized beta
Cost averaging
Periodic rate
Bill-and-hold basis
50. A listing in which tile order of tile listed items does not matter.
Liquidation
Combination
Cost of goods sold
Value