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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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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 quantitative measure that specifies where data are centered.
Definition of value (or standard of value)
Payoff
Measure of central tendency
Addition rule for probabilities
2. Research and development costs relating to projects that are not yet completed - such as have been incurred by a company that is being acquired.
Measurement scales
In-process research and development
Paired observations
Multi-step format
3. An estimate of the cost of common equity that is produced by summing the before-tax cost of debt and a risk premium that captures the additional yield on a company's stock relative to its bonds. The addi-tional yield is often estimated using historic
Payment netting
Bond yield plus risk premium approach
Forward contract
Normalized earnings
4. 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) .
Equitizing cash
Focus
Semideviation
Clean surplus accounting
5. The rate of dividend (and earnings) growth that can be sustained over time for a given level of re turn on equity - keeping the capi tal structure constant and wi thout issuing addi tional common stock.
Transition phase
Sustainable growth rate
Assignment of accounts receivable
Discount rate
6. A criterion asserting that the optimal portfolio is the one that minimizes the probability that portfolio return falls below a threshold level.
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7. A financial instrument that gives one party the right - but not the obligation - to buy or sell an underlying asset from or to another party at a fixed price over a specific period of time. Also referred to as contingent claims.
Futures commission merchants (FCMs)
Interquartile range
Acquisition method
Option
8. The quantity of goods and services that a country exports to pay for its imports of goods and services.
Balance-sheet-based accruals ratio
Exposure to foreign exchange risk
Terms of trade
Leverage
9. A normal operating expense that has been paid in advance of when it is due.
Rule of 72
Leverage
Prepaid expense
Pet projects
10. 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.
Call
Skewed
Nominal scale
Tangible assets
11. A tax that is imposed by the importing coun-try when an imported good crosses its interna-tional boundary.
Merger
Tariff
Face value (also principal - par value - stated value - or maturity value)
Poison pill
12. ROA) A prof-itability ratio calculated as operating income divided by average total assets.
Tracking portfolio
Operating return on assets (operating
Long
Capitalized cash flow model (method)
13. An active investment strategy that includes intentional matching of the timing of cash outflows with investment maturities.
Pure-play method
Credit VAR - default VAR - or credit at risk
Accumulated depreciation
Matching strategy
14. The price for immediate purchase of the underlying asset.
Nonstationarity
Relative dispersion
Cash price or spot price
Mean absolute deviation
15. CMT swap A swap in which the floating rate is the rate on a security known as a constant maturity treasury or CMT security.
Systematic sampling
Constant maturity swap or
Price limits
Receiver swaption
16. The estimation of an unknown value on the basis of two known values that bracket it - using a straight line between the two known values.
Inverse floater
Linear interpolation
Beta
Unearned revenue (deferred revenue)
17. A solvency ratio calculated as total debt divided by total debt plus total share-holders ' equi ty.
Simple random sampling
Operating risk
Economic exposure
Debt-to-capital ratio
18. The original time to maturity on a swap.
Partnership
Tenor
Node
Accumulated depreciation
19. The relationship between option price and volatility.
Centralization permits economies of scale and allows a company to use some of its risks to offset other risks.
Treasury stock method
Vega
Leverage
20. An activity ratio equal to rev-enue divided by average receivables.
Arbitrage
Receivables turnover
Performance guarantee
Management buyout (MBO)
21. The smallest level of significance at whichthe null hypothesis can be rejected; also called themarginal significance level.
P Value
Investment opportunity schedule
Real exchange rate
Neoclassical growth theory
22. 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.
Random walk
Caplet
Complement
Log-linear model
23. The use of fixed costs in operations.
Specific identification method
Expenses
Operating leverage
Prior transaction method
24. Costs borne by owners to moni tor the management of the company (e.g. - board of director expenses).
Free cash flow
Contra account
Monitoring costs
Friendly transaction
25. Aka Harmonic mean.
Exit price
If-converted method
Monetary/nonmonetary method
Weighted harmonic mean
26. The amount of time between check issuance and a check's clearing back against the company's account.
Forward dividend yield
Disbursement float
Net present value (NPV)
Benchmark value of the multiple
27. The present discounted value of future cash flows: For assets - the present dis-counted value of the future net cash inflows that the asset is expected to generate; for liabilities - the present discounted value of the future net cash outflows that a
Parameter instability
Present value (PV)
Bull spread
Equitizing cash
28. Debt and equity secu-rities not classified as either held-to-maturity or held-for-trading securities. The investor is willing to sell but not actively planning to sell. In general - available-for-sale securities are reported at fair value on the bala
Band-of-investment method
Dependent variable
Unconditional heteroskedasticity
Available-for-sale investments
29. The cost associated with holding someasset - including financing - storage - and insurancecosts. Any yield received on the asset is treated as anegative carrying cost.
Held-to-maturity investments
Cost of carry
Flexible exchange rate
Standardizing
30. A combination of a long cap and a short floor - or a short cap and a long floor. A col-lar in general can have an underlying other than an interest rate.
Interest rate collar
Management buyout (MBO)
Operating activities
Total asset turnover
31. Differences between tax and financial reporting of revenue (expenses) that will not be reversed at some future date. These result in a difference between the company's effective tax rate and statutory tax rate and do not result in a deferred tax item
Equity forward
Accumulated depreciation
Dilution
Permanent differences
32. Total assets minus total liabilities.
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33. The expected return on an invest-ment minus the risk-free rate.
Direct format (direct method)
Basis point value (BPV)
Tax expense
Risk premium
34. Amounts that a business owes to its vendors for goods and services that were pur-chased from them but which have not yet been paid.
Minimum-variance portfolio
Settlement period
Empirical probability
Accounts payable
35. The risk associated with accounting standards that vary from country to country or with any uncertainty about how certain transac-tions should be recorded.
Scaled earnings surprise
Accounting risk
In-sample forecast errors
Target capital structure
36. The ability to make additional investments in a project at some future time if the financial results are strong.
Exercise price (strike price - striking price - or strike)
Managerialism theories
Tobin's q
Growth option or expansion option
37. A measure of the time needed to convert raw materials into cash from a sale; it con-sists of the number of days of inventory and the number of days of receivables.
Current liabilities
Operating cycle
Debt rating approach
Assets
38. Investments in which investors exert significant influence - but not con-trol - over the investee. Typically - the investor has 20 to 50 % ownership in the investee.
Taxable temporary differences
Interest rate cap or cap
Minority active investments
Geometric mean
39. The difference between the observed value of a statistic and the quantity it is intended to estimate.
Longitudinal data
Unclassified balance sheet
Positive serial correlation
Sampling error
40. CreaLing a contrac t with standard and generally accepted terms - which makes it moreacceptable to a broader group of participants.
Scalper
Homogenization
Buy-side analysts
Financial transaction
41. Public-company com-parables for the company being valued.
Lemons problem
Time to expiration
Income tax paid
Guideline public companies
42. 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.
Clearinghouse
Creditworthiness
Clientele effect
Method based on forecasted fundamentals
43. The difference between net operating assets at the end and the beginning of the period compared to the average net operating assets over the period.
Fair value
Delivery
Minimum-variance portfolio
Balance-sheet-based accruals ratio
44. With reference to fundamental factor models - the value of the attribute for an asset minus the average value of the attribute across all stocks - divided by the standard deviation of the attribute across all stocks.
Consolidation
Direct format (direct method)
Uniting of interests method
Standardized beta
45. The relationship of the quantity of an asset being hedged to the quantity of the deriva-tive used for hedging.
Addition rule for probabilities
Purchased in-process research and development costs
Hedge ratio
Absolute frequency
46. A company's chosen propor-tions of debt and equity.
Target capital structure
Asian call option
Multi-step format
Systematic sampling
47. Segment liabilities divided by segment assets.
Segment debt ratio
Creditworthiness
Neoclassical growth theory
Liruit move
48. 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
Free cash flow
No-growth company
Fair value
Trailirig dividend yield
49. The yield to maturity on a basis that ignores compounding.
Bond-equivalent yield
Flip-in pill
Maintenance margin requirement
Degrees of freedom (df)
50. The currency in which finan-cial statement amounts are presented.
Tariff
Independent projects
Presentation currency
Operating activities