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Test your basic knowledge |
CFA Level2 Vocab
Start Test
Study First
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. A method of valuing prop-erty based on site value plus current construction costs less accrued depreciation.
Company share-related factors
Cost approach to value
Portfolio selection/composition problem
Interest rate put
2. The number of units pro-duced and sold at which the company's operating profit is zero (revenues = operating costs).
Gamma
Ordinal scale
Operating breakeven
Terminal price multiple
3. The process by which options and other derivatives are priced by treating investors as though they were risk neutral.
Direct f'mancing lease
Risk-neutral valuation
Price to sales
Ratio scales
4. The cash flow that is real-ized because of a decision; the changes or incre-ments to cash flows resulting from a decision or action.
Sector neutralizing
Minimum-variance portfolio
Heteroskedasticity-consistent standard errors
Incremental cash flow
5. The particular value calculated from sam-ple observations using an estimator.
Legislative and regulatory risk
Agency relationships
Estimate
Retail method
6. The probability that an asset's value moves up.
Target semideviation
Regime
Days of sales outstanding (DSO)
Up transition probability
7. With reference to statistical inference - astatement about one or more populations.
Unbilled revenue (accrued revenue)
Cost leadership
Power of a test
Hypothesis
8. Large industry groupings.
Economic sectors
Securities offering
Captive rmance subsidiary
Return on common equity (ROCE)
9. A hypothesis concern-ing pricing behavior that holds that even though there are only a few firms in an industry - they are forced to price their products more or less com-petitively because of the ease of entry by outsiders. The key aspect of a conte
Notes payable
Theory of contestable markets
Holder-of-record date
Balance of payments accounts
10. A quantity computed from or used to describe a sample.
Acquisition method
Sample statistic or statistic
Histogram
Arithmetic mean
11. Analysis that shows the changes in key financial quantities that result from given (economic) events - such as the loss of customers - the loss of a supply source - or a catastrophic event; a risk management technique involving examina-tion of the pe
Scenario analysis
Range
No-growth value per share
Settlement price
12. A process used in a deliverable forward contract in which the long pays the agreed-upon price to the short - which in turn delivers the underlying asset to the long.
Agency costs
Log-linear model
Delivery
Spin-off
13. The number of indepen-dent observations used.
Equity dividend rate
Degrees of freedom (df)
Conglomerate discount
Premise of value
14. A method of estimating VAR that uses data from the returns of the portfolio over a recent past period and compiles this data in the form of a histogram.
Type I error
Investment objectives
Liquidity risk
Historical method
15. Systems that capture transaction data at the physical location in which the sale is made.
Protective put
Collar
Point of sale
Legislative and regulatory risk
16. The difference between the fixed rate on an interest rate swap and the rate on a Trea-sury note with equivalent maturity; it reflects the general level of credit risk in the market.
Cap
Swap spread
Homogenization
Private sector surplus or deficit
17. Options that are far in-the-money.
Winner's curse
Deep in the money
Day trader
Return on equity (ROE)
18. An observation drawn from a uni-form distribution.
Cost of carry
Random number
Decision rule
Earnings expectation management
19. Assets used as benchmarks when applying the method of com parables to value an asset.
Securities Exchange Act of 1934
Comparables (comps - guideline assets - guideline com-panies)
Agency costs of equity
Residual income model (RIM) (also discounted ahnormal earnings model or Edwards-Bell-Ohlson model)
20. The amount by which a unit of currency will grow in a year with interest on inter-est included.
Sum-of-the-parts valuation
Effective annual rate
Heteroskedasticity-consistent standard errors
Top-down analysis
21. The sum of market value of common equity - book value of preferred equity - and face value of debt.
Expensed
Covered call
Total invested capital
Diluted earnings per share (diluted
22. A procedure used in certain deriva-tive transactions that specifies that the long and short parties engage in the equivalent cash value of a delivery transaction.
Cash settlement
Theta
Vesting date
Mode
23. The feature of a futures contract giv-ing the short the right to make decisions about what - when - and where to deliver.
Cost of debt
Company share-related factors
Interval scale
Deliveryoption
24. An experiment that can produce one of two outcomes.
Cash flow statement (statement of cash flows)
Bernoulli trial
Error term
Discounted cash flow analysis
25. A bar chart of data that have been grouped into a frequency distribution.
Fixed costs
Target semivariance
Dumping
Histogram
26. Taken as a deduction in arriving at net income.
Degree of confidence
Bernoulli trial
Expensed
Mispricing
27. The cash flow available to a company's common shareholders after all operat-ing expenses - interest - and principal payments have been made - and necessary investments in working and fixed capital have been made.
Independent
Nondeliverable forwards (NDFs)
Enhanced derivatives products companies (EDPC)
Free cash flow to equity
28. An estimate of the country spread (country equity premium) for a develop-ing nation that is based on a comparison of bonds yields in country being analyzed and a developed country. The sovereign yield spread is the differ-ence between a government bo
Priced risk
Sovereign yield spread
Adjusted beta
Delivery
29. A solvency ratio measuring the number of times interest and lease payments are covered by operating income - calculated as (EBIT + lease payments) divided by (interest payments + lease payments).
Working capital turnover
Fixed charge coverage
Legal risk
Error autocorrelation
30. 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.
Historical cost
Overall capitalization rate
Value
Put-call parity
31. Method used to estimate the overall capitalization rate by dividing the sale price of a comparable income property into the net operating income.
Market-extraction method
Days of inventory on hand (DOH)
Portfolio selection/composition problem
Unearned fees
32. A probability distribution that specifies the probabilities for a group of related random variables.
Monopolization
Historical simulation (or back simulation)
Target semideviation
Multivariate distribution
33. With reference to a time series - the underly-ing model generating the times series.
Industry structure
Receivables turnover
Seats
Regime
34. The sensitivity of the option price to the risk-free rate.
Perfect collinearity
Rho
Unlimited funds
Proxy statement
35. A quantity whose future outcomes are uncertain.
Random variable
Monitoring costs
Benchmark value of the multiple
Income statement (statement of operations or profit and loss statement)
36. The use of inven-tory as collateral for a loan; similar to a trust receipt arrangement except there is a third party (i.e. - a warehouse company) that supervises the inventory.
Bond indentnre
Warehouse receipt arrangement
Accounting estimates
Ordinary least squares (OLS)
37. Company growth in output or sales that is achieved by buying the necessary resources externally (i.e. - achieved through mergers and acquisitions) .
Moneyness
External growth
Single-payment loan
Reconciliation
38. The market value of debt and equity.
Imports
Deferred tax assets
Market value of invested capital
Credit analysis
39. A trend in which the dependent vari-able changes at a constant rate with time.
Breakup value or private market value
Liquidity premium
Optimal capital structure
Linear trend
40. With reference to assets - the amount of cash or cash equivalents that could currently be obtained by sell ing the asset i an orderly disposal; with reference to lia-bilities - the undiscounted amount of cash or cash equivalents expected to be paid t
First-differencing
Management buyout (MBO)
Realizable value (settlement value)
Combination
41. Accounting in which some income items are reported as part of stockholders' equity rather than as gains and losses on the income statement; certain items of comprehensive income bypass the income statement and appear as direct adjustments to sharehol
Swap spread
Dirty surplus accounting
Hostile transaction
Random number generator
42. The risk associated with the pos-sibility that a payment due at a later date will not be made.
Potential credit risk
Specific identification method
Multivariate normal distribution
Standard cost
43. An investment decision rule that accepts projects or investments for which the IRR is greater than the opportunity cost of capital.
IRR rule
Earnings yield
Sampling error
Activity ratios (asset utilization or operating efficiency ratios)
44. An association or relationship between variables that cannot be graphed as a straight line.
Marking to market
Nonlinear relation
Instability in the minimum-variance frontier
FIFO method
45. 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.
Net profit margin (profit margin or return on sales)
Quintiles
Valuation ratios
Time-weighted rate of return
46. An approach to investment analysis and security selection.
LIFO method
Put
Investment strategy
Leveraged floating-rate note or leveraged floater
47. The rule that - on the average - with no change in technology - a 1 percent increase in capital per hour of labor brings a 1/3 percent increase in labor productivity.
One third rule
Internal rate of return (IRR)
White knight
Cost of capital
48. 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).
Unearned revenue (deferred revenue)
Greenmail
Exposure to foreign exchange risk
American
49. The mix of debt and equity that a company uses to finance its business; a company's specific mixture of long-term financing.
Time-series data
Noncurrent
Power of a test
Capital structure
50. An investment where the investor exerts control over the investee - typically by having a greater than 50 percent ownership in the investee.
Two-sided hypothesis test (or two-tailed hypothesis test)
Bear spread
Controlling interest
Shortfall risk