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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.
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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. A potential business combina-tion that is endorsed by the managers of both companies.
Effective annual yield (EAY)
Purchasing power loss
Frequency polygon
Friendly transaction
2. A probability distribution that specifies the probabilities for a group of related random variables.
Bill-and-hold basis
Multivariate distribution
Break point
Pure factor portfolio
3. (No longer allowed under U.S. GAAP or IFRS.)
U.S. GAAP and uniting of interests under IFRS
Nonstationarity
Efficient portfolio
Minority interest (noncontrolling interest)
4. An act passed by the U.S. Con-gress in 1933 that specifies the financial and other significant information that investors must receive when securities are sold - prohibits misrepresenta-tions - and requires initial registration of all public issuance
Securities Act of 1933
Random number
Accounting estimates
Standardized beta
5. An observation drawn from a uni-form distribution.
Random number
Seats
Bond-equivalent basis
Holding period yield (HPy)
6. 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
Monetary assets and liabilities
Real GDP per person
Ordinary annuity
Ratio spread
7. The principles governing equivalence relationships between cash flows with different dates.
Securities offering
Present value model or discounted cash flow model
Complement
Time value of money
8. The principle that the approximate num-ber of years necessary for an investment to double is 72 divided by the stated interest rate.
Rule of 72
Parameter
Direct format (direct method)
Panel data
9. A probability distri-bution for a group of random variables that is completely defined by the means and variances of the variables plus all the correlations between pairs of the variables.
Economic profit
Trade receivables (commercial receivables or accounts receivable)
Corporation
Multivariate normal distribution
10. A profitability ratio calcu-lated as net income divided by average sharehold-ers' equity.
Bottom-up analysis
Liruit up
Earnings management activity
Return on equity (ROE)
11. Time thought of as advancing in dis-tinct finite increments.
Sales
Discrete time
Type II error
European-style option or
12. Public-company com-parables for the company being valued.
Purchase method
Regulatory risk
Probability distribution
Guideline public companies
13. A prof -itabili ty ratio calculated as operating income (i.e. - income before inte est and taxes) divided by revenue.
Mismatching strategy
Rule of 72
Ope ating profit margin (operating margin)
Binomial tree
14. Netting the market values of all derivative contracts between two parties to deter-mine one overall value owed by one party to another in the event of bankruptcy.
Future value (FV)
Optimizer
Acquisition
Closeout netting
15. The company in a merger or acquisition that is being acquired.
Target company - or target
Tender offer
Neoclassical growth theory
Sample mean
16. Segment liabilities divided by segment assets.
Nominal exchange rate
Linear trend
Segment debt ratio
Completed contract
17. Probabilities that generally do not vary from person to person; includes a pri-ori and objective probabilities.
Volatility
Discounted cash flow analysis
Objective probabilities
Benchmark value of the multiple
18. The most recent quarterly dividend multiplied by four.
Just-in-time method
Qualitative dependent variables
Overall capitalization rate
Dividend rate
19. Present obligations of an enterprise aris-ing from past events - the settlement of which is expected to result in an outflow of resources embodying economic benefits; creditors' claims on the resources of a company.
Bull spread
Scalper
Liabilities
Time-period bias
20. A balance sheet organized so as to group together the various assets and liabilities into subcategories (e.g. - current and noncurrent) .
Classified balance sheet
Capital budgeting
Inverse price ratio
Benchmark value of the multiple
21. Linear regression involv-ing two or more independent variables.
Price limits
Multiple linear regression
Component cost of capital
Breakup value or private market value
22. The existence of an exact linear relation between two or more independent vari-ables or combinations of independent variables.
Build-up method
Perfect collinearity
Margin
Sample skewness
23. Depositary Receipt A negotiable certifi -cate issued by a depositary bank that represen ts ownersh ip in a non-U .S. company's deposi ted equity (i.e. - equity held in custody by the deposi-tary bank in the company's home market).
American
Fixed asset turnover
Direct f'mancing lease
Random variable
24. A wholly-owned sub-sidiary of a company that is established to provide financing of the sales of the parent company.
Comparative advantage
Cross-sectional analysis
Winner's curse
Captive rmance subsidiary
25. The estimated fair value of the price multiple - usually based on fore-casted fundamentals or comparables.
Justified price multiple (or warranted price multiple or intrinsic price multiple)
Sample variance
Equity options
Mark-ta-market
26. Method of valu-ing property based on recen t sales prices of simi-lar properties.
Lemons problem
Default risk premium
Direct sales-comparison approach
Finance lease (capital lease)
27. The perceived ability of the bor-rower to pay what is owed on the borrowing in a timely manner; it represents the ability of a com-pany to withstand adverse impacts on its cash flows.
Liquidation value
Creditworthiness
Earnings expectation management
Conversion factor
28. Bias introduced by systemati-cally exclua ing some members of the population according to a particular attribute-for example - the bias introduced when data availability leads to certain observations being excluded from the analysis.
Index option
Sample selection bias
Variable costs
Maturity premium
29. A form of centralized risk management that typically encompasses the man-agement of a broad variety of risks - ind uding insuran -ce risk.
Mature growth rate
Enterprise risk management
Discount for lack of control
Population standard deviation
30. Commercial and investmentbanks that make markets in derivatives.
Neoclassical growth theory
Forward contract
Derivatives dealers
Catalyst
31. Total assets minus total liabilities.
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32. Approach to trans-lating foreign currency financial statements for consolidation in which monetary assets and liabil-ities are translated at the current exchange rate. Nonmonetary assets and liabilities are translated at historical exchange rates (th
Monetary/nonmonetary method
Earnings game
Normalized
Currency option
33. Events such that only one can occur at a time.
Mutually exclusive events
Backward integration
Multivariate distribution
Financial analysis
34. A market index portfolio.
Reviewed fmancial statements
Consolidation
Passive portfolio
Cost of equity
35. A swaption that allows the holder to enter into a swap as the fixed-rate receiver and floating-rate payer.
Receiver swaption
Floor traders or locals
Time to expiration
Partnership
36. A measurement scale that sorts data into categories that are ordered (ranked) with respect to some characteristic.
Sovereign yield spread
Ordinal scale
Sales
Discounted cash flow analysis
37. Revenue after adjustments (e.g. - for estimated returns or for amounts unlikely to be collected).
Net revenue
Liruit move
Credit analysis
Type II error
38. A gain in value caused bychanges in price levels. Monetary liabilities expe-rience purchasing power gains during periods ofinflation.
Purchasing power gain
Impairment of capital rule
Model specification
Tax base (tax basis)
39. A graphical representa-tion of the expected return and risk of all portfo-lios that can be formed using two assets.
Breakup value or private market value
Portfolio possibilities curve
Mean reversion
Analysis of variance (ANOVA)
40. A model that specifies an asset's intrinsic value.
Direct format (direct method)
Stock options (stock option grants)
Cost recovery method
Absolute valuation model
41. An estimate of the equity risk pre-mium that is based upon estimates provided by a panel of finance experts.
Operations risk or operational risk
Survey approach
Acquiring company - or acquirer
ackwardation
42. Quantiles that divide a distribution into five equal parts.
Sampling distribution
Quintiles
Proportionate consolidation
Futures exchange
43. A measure of VAR equivalentto the analytical method bu t that refers to the use of delta to estimate the option's price sensitivity.
Provision
U.S. official reserves
Conditional expected value
Delta-normal method
44. The amount of book value (also called carrying value) of common equity per share of common stock - calculated by dividing the book value of shareholders' equity by the num-ber of shares of common stock outstanding.
Book value equity per share
Flotation cost
Normalized earnings
Equilibrium
45. The smallest level of significance at whichthe null hypothesis can be rejected; also called themarginal significance level.
P Value
Write-down
Statistical inference
Laddering strategy
46. An option that gives the holder the right to buy an underlying asset from another party at a fixed price over a specific period of time.
Free cash flow to equity model
Independent variable
Semilogarithmic
Call
47. A variation of the market approach; considers actual transactions in the stock of the subject private company.
Expiration date
Taxable income
Ordinary shares (common stock or common shares)
Prior transaction method
48. 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.
Technical indicators
Money market yield (or CD equivalent yield
Log-linear model
Joint probability
49. 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.
Cointegrated
Business risk
Securities Exchange Act of 1934
Agency costs
50. An opportunity to conduct an arbitrage; an opportunity to earn an expected positive net profit without risk and with no net investment of money.
Ex-dividend date
Sell-side analysts
Proxy fight
Arbitrage opportunity