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. The part of the execution step of the portfolio manage-ment process in which investment strategies are integrated with expectations to select a portfolio of assets.






2. A forward contract in which the underlying is a bond.






3. A stage of growth in which a company typically enjoys rapidly expanding markets - high profit margins - and an abnormally high growth rate in earnings per share.






4. The value that investors forgo by choosing a particular course of action; the value of something in its best alternative use.






5. Hirschman Index A measure of rna ket concentration that is calculated by summing the squared mar et shares for competing companies in an industry; high HHI readings or mergers that would result in large HHI increases are more likely to result in regu






6. Businesses with high sensitivity to business- or industry-cycle influences.






7. 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.






8. Common-size analysis thatinvolves comparing a specific financial statementwith that statement in prior or future time peri-ods; also - cross-sectional analysis of one companywith another.






9. A present value model of stock value that views the intrinsic value of a stock as present value of the stock's expected future dividends.






10. A portfolio having factor sensitiv-ities that are matched to those of a benchmark or other portfolio.






11. A market index portfolio.






12. 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






13. The autocorrelation of the error term.






14. An option strategy involving the purchase of a put and sale of a call in which the holder of an asset gains protection below a certain level - the exercise price of the put - and pays for it by giving up gains above a certain level - the exercise pri






15. Assets and liabilities with value equal to the amount of currency con-tracted for - a fixed amount of currency. Examples are cash - accounts receivable - mortgages receiv-able - accounts payable - bonds payable - and mort-gages payable. Inventory is






16. A swap in which the floating payments have a lower limit.






17. The difference between inventory reported as FIFO and 'nventory reported as LIFO (FIFO inventory value less LIFO inventory val e).






18. An aggregate of an entity's income tax payable (or recoverable in the case of a tax benefit) and any changes in deferred tax assets and liabili-ties. It is essentially the income tax payable or recoverable if these had been determined based on accoun






19. With reference to statistical infer-ence - the subdivision dealing with the testing ofhypotheses about one or more populations.






20. To sell the assets of a company - division - or subsidiary piecemeal - typically because of bank-ruptcy; the form of bankruptcy that allows for the orderly satisfaction of creditors' claims after which the company ceases to exist.






21. An equation describing the expected return on any asset (or portfolio) as a linear function of its beta relative to the market portfolio.






22. An objective measure of the quality and safety of a company's debt based upon an analysis of the company's ability to pay the prom-ised cash flows - as well as an analysis of any indentures.






23. A merger or acquisition that is to be paid for with cash; the cash for the merger might come from the acquiring company's existing assets or from a debt issue.






24. A measure of dispersion relat-ing to a population - calculated as the mean of the squared deviations around the population mean.






25. Time thought of as advancing in extremely small increments.






26. The competitive strategy of seeking a compet-itive advantage within a target segment or seg-ments of the industry - either on the basis of cost leadership (cost focus) or differen tiation (differ-entiation focus) .






27. European option An option contract that can only be exercised on its expiration date.






28. In the context of inventory management - the need for inventory as part of the routine production-sales cycle.






29. 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.






30. An approach to using price multiples that relates a price multiple to forecasts of fundamentals through a discounted cash flow model.






31. A specifi-cation of how 'value' is to be understood in the context of a specific valuation.






32. 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.






33. Linear regression involv-ing two or more independent variables.






34. Controlling additional property throughreinvestment - refinancing - and exchanging.






35. A trend in which the dependent vari-able changes at a constant rate with time.






36. The standard deviation of the differ-ence in returns between an active investment portfolio and its benchmark portfolio; also called tracking error volatility - tracking risk - and active risk.






37. 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.






38. An annuity with a first cash flow that is paid one period from the present.






39. A record of foreign investment in a country minus its investment abroad.






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






41. A country that during its entire his-tory has borrowed more in the rest of the world than other countries have lent in it.






42. Shares that were issued and subse-quently repurchased by the company.






43. A test that is not concerned with a parameter - or that makes minimal assumptions about the population from which a sam Ie comes.






44. The market price of an asset or lia-bility that trades regularly.






45. A series of put options on an interest rate - with each option expiring at the date on which the floating loan rate will be reset - and with each option having the same exercise rate. A floor in general can have an underlying other than the interest






46. A synonym for robust standard errors.






47. An inventory accounting method in which the sales value of an item is reduced by the gross margin to calculate the item's cost.






48. A pre-offer takeover defense mechanism that makes it prohibitively costly for an acquirer to take control of a target without the prior approval of the target's board of directors.






49. The company's total cost of capital in money terms.






50. An ordered listing.