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. An option strategy involving the purchase of a Rut and a call wi th the same exercise price. A straddle is based on the expectation of high volatili ty of the underlying.






2. 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.






3. A swap in which each party makes ayments to the other in different currenmes.






4. The most common type of commun-size analysis - ill which the accounts in a given period are compared to a benchmark item in that same year.






5. Describes two time series that have a long-term financial or economic relationship such that they do not diverge from each other without bound in the long run.






6. 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.






7. Describes a distribution that is more peaked than a normal distribution.






8. The actual value of a variable minus its pre-dicted (or expected) value.






9. Method of accounting in which the effect of transactions on financial condition and income are recorded when they occur - not when they are settled in cash.






10. The number of indepen-dent observations used.






11. The possession of monopoly power in the relevant market and the willful acquisition or maintenance of that power - as distinguished from growth or development as a consequence of a superior product - business acumen - or historical accident.






12. To defer the decision to invest in a future projecn until the outcome of some or all of a current project is known. -Projects are sequenced through time - so that investing iN a project creates the option to invest in future projects.






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






14. An option strategy in which a position in an asset is converted to a risk-free position with a position in a specific number of options. The number of options per unit of the underlying changes through time - and the position must be revised to maint






15. An annualized return that accounts for the effect of interest on interest; EAY is computed by compounding 1 plus the holding period yield forward to one year - then subtracting 1.






16. A forward contract to enter into a swap.






17. A type of subsidiary engaged in derivatives trans-actions that is separated from the parent company in order to have a higher credit rating than the parent company.






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






19. A depreciation method tHat allocates the cost of a long-lived asset based on-actual usage during the period .






20. The market in which the currency of one country is exchanged for the cur-rency of another.






21. A multifactor model In which statistical methods are applied to a set of historical returns to determine portfolios that best explain either historical return covariances or vanances.






22. The risk associated with the conversion of foreign financial statements into domestic currency.






23. Desired investment outcomes; includes risk objectives and return objectives.






24. A formula that expresses the equivalence or parity of spot and forward rates - after adjusting for differences in the interest rates.






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






26. Any rate used in finding the present value of a future cash flow.






27. With reference to time-series mod-els - a model in which the growth rate of the time series as a function of time is constant.






28. An amount equal to saving minus investment.






29. The yield to maturity on a basis that ignores compounding.






30. The actual cash that would be avail-able to the company's investors after making all investments necessary to maintain the company as an ongoing en terprise (also referred to as free cash flow to the firm); the internally generated funds that can be






31. 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.






32. The ratio of cash dividends paid to earnings for a period.






33. The process of valuing long-lived assets at fair value - rather than at cost less accumulated depreciation. Any resulting profit or loss is either reported on the income statement and/or through equity under revaluation surplus.






34. A reduction or discount to value for shares that are not publicly traded.






35. With reference to statisti. cal inference - the subdivision dealing with estimating the value of a population parameter.






36. An approach to investment analysis and security selection.






37. The first date that a share trades without (i.e. - 'ex') the dividend.






38. A poison pill takeover defense that gives target company shareholders the right to purchase shares of the acquirer at a significant discount to the market price - which has the effect of causing dilution to all existing acquiring com-pany shareholder






39. A theory of economic growth based on the view that the growth of real GDP per person is temporary and that when it rises above subsistence level - a population explo-sion eventually brings it back to subsistence level.






40. A quantitative measure that specifies where data are centered.






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






42. A linear regression model with two or more independent variables.






43. In the context of customer receipts - the amount of money that is in transit between pay-ments made by customers and the funds that are usable by the company.






44. The sum of market value of common equity - book value of preferred equity - and face value of debt.






45. A variation of the market approach; establishes a value estimate based on the observed multiples from trading activity in the shares of public companies viewed as reasonably comparable to the subject private company.






46. Any outcome or specified set of outcomes of a random variable.






47. An unlimited funds environment assumes that the company can raise the funds it wants for all profitable projects simply by paying the required rate of return.






48. An equation expressing the equiva-lence (parity) of a portfolio of a call and a bondwith a portfolio of a put and the underlying -which leads to the relationship between put andcall prices






49. Unexpected earnings divided by the standard deviation of analysts' earnings forecasts.






50. A person or organization seeking to profit by acquiring a company and reselling it - or seeking to profit from the takeover attempt itself (e.g. - greenmail).