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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.
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1. An interest rate swap in which the notional principal is indexed to the level of interest rates and declines with the level ofinterest rates according to a predefined schedule. This type of swap is frequently used to hedge secu-rities that are prepai
Net asset balance sheet exposure
Conditional probability
Unbilled revenue (accrued revenue)
Index amortizing swap
2. The quantity of goods and services that a country exports to pay for its imports of goods and services.
Active investment managers
Contra account
Monitoring costs
Terms of trade
3. Aka 'Market efficiency.
Traditional efficient markets formulation
Classical growth theory
Clientele effect
Asian call option
4. Income approach that values an asset based on estimates of future cash flows discounted to present value by using a discount rate reflective of the risks associated wi th the cash flows.
Stock purchase
Subsistence real wage rate
Qualifying special purpose entities
Free cash flow method
5. The amount available for fixed costs and profit after paying variable costs; rev-enue minus variable costs.
Contribution margin
Constant maturity swap or
Exit price
Mature phase
6. 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.
Liquidation
Kurtosis
Unlimited funds
Factor risk premium (or factor price)
7. A balance sheet organized so as to group together the various assets and liabilities into subcategories (e.g. - current and noncurrent) .
Classified balance sheet
Active strategy
Price momentum
Economic growth rate
8. A variation of the market approach; considers actual transactions in the stock of the subject private company.
Confidence interval
Perfect collinearity
After-tax cash flow (ATCF)
Prior transaction method
9. A market index portfolio.
Locked limit
Passive portfolio
Error term
Pecking order theory
10. The amount of dispersion rela-tive to a reference value or benchmark.
Creditworthiness
Relative dispersion
Sarbanes-Oxley Act
Tangible book value per share
11. Debt (fixed-income) securities that a company intends to hold to matu-rity; these are presented at their original cost - updated for any amortization of discounts or pr.emiums.
Error autocorrelation
Alpha (or abnormal return)
Held-to-maturity investments
Mean reversion
12. Any outcome or specified set of outcomes of a random variable.
Yield beta
Event
Credit swap
Government sector surplus or deficit
13. The condition in futures markets in which futures prices are higher than expected spot prices.
Capped swap
Normal contango
Relative frequency
NPV rule
14. A financial statement that reconciles the beginning-of-period and end-of-period balance sheet values of shareholders' equity; provides information about all factors affecting shareholders' equity.
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15. The owner of an asset that grants the right to use the asset to another party.
Lessor
Uniting of interests method
Credit analysis
Segment ROA
16. A scheme of measuring differ-ences. The four types of measurement scales are nominal - ordinal - interval - and ratio.
Expectational arbitrage
Balance-sheet-based aggregate accruals
Measurement scales
Unconditional heteroskedasticity
17. An agreement between two parties to exchange a series of future cash flows.
Percentiles
Bundling
Portfolio implementation problem
Swap
18. A dollar deposited outside the United States.
Eurodollar
Foreign currency
Common size statements
Dividend discount model (DDM)
19. With reference to the presenta-tion of expenses in an income statement - the grouping together of expenses by similar nature - e.g. - all depreciation expenses.
Dividend payout policy
Instability in the minimum-variance frontier
Grouping by nature
Moneyness
20. 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
Pecking order theory
Free cash flow
Matrix pricing
Transaction exposure
21. Observations over individual units at a point in time - as opposed to time-series data.
Return on equity (ROE)
Exchange for physicals (EFP)
Cross-sectional data
Equitizing cash
22. A measure of dispersion relat-ing to a population - calculated as the mean of the squared deviations around the population mean.
Population variance
Designated fair value instruments
Out-of-the-money
Carrying amount (book value)
23. Accounting that satisfies the condition that all changes in the book value of equity other than transactions with owners are reflected in income. The bottom-line income reflects all changes in shareholders' equity arising from other than owner transa
Sample selection bias
Clean surplus accounting
J oint probability function
Yield beta
24. The company in a merger or acquisition that is acquiring the target.
Corporation
Acquiring company - or acquirer
Partnership
Spearman rank correlation coefficient
25. 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
Realizable value (settlement value)
Covariance
Maintenance margin requirement
Price relative
26. The share price at a particular point in the future.
Local currency
Treasury stock method
Terminal share price
Terminal price multiple
27. As used in option pricing - the standard deviation of the continuously compounded returns on the underlying asset.
Scenario analysis
Fiduciary call
Retail method
Volatility
28. An extra return that compen-sates investors for expected inflation.
Unconditional probability (or marginal probability)
Hypothesis testing
Law of one price
Inflation premium
29. An active investment strategy whereby the timing of cash outflows is not matched with investment maturities.
Mismatching strategy
Hypothesis
Adjusted R2
Matching principle
30. A method of accounting in which combined companies were portrayed as if they had always operated as a single economic entity. Called pooling of interests under U.S. GAAP and uniting of interests under IFRS. (No longer allowed under U.S. GAAP or IFRS.
LIFO layer liquidation (LIFO liquidation)
Intergenerational data mining
Fundamentals
Pooling of interests accounting method
31. When assets trans-lated at the current exchange rate are greater in amount than liabilities translated at the current exchange rate. Assets exposed to translation gains or losses exceed the exposed liabilities.
Net asset balance sheet exposure
Focus
Present value model or discounted cash flow model
Capital charge
32. An option strategy that is equiva-lent to a short butterfly spread.
Ope ating profit margin (operating margin)
Hedge ratio
Sandwich spread
Residual loss
33. The P/E to-growth ratio - calculated as the stock's PI E divided by the expected earnings growth rate.
Efficient frontier
PEG
Out-of-sample forecast errors
Controlling interest
34. A possible value of a random variable.
Terminal value of the stock (or continuing value of the stock)
Longitudinal data
Outcome
Weighted mean
35. An activity ratio equal to the number of days in period divided by receivables turnover.
Days of sales outstanding (DSO)
Leptokurtic
Segment margin
Cash settlement
36. The risk associated with the pos-sibility that a payment due at a later date will not be made.
Residual income (or economic profit or abnormal earnings)
Potential credit risk
Expensed
Population
37. A measure of sensitivity; the incremental change in one variable with respect to an incre-mental change in another variable.
Rejection point (or critical value)
Purchase method
Elasticity
Balance sheet (statement of fmandal position or state-ment of fmandal condition)
38. An activity ratio equal to the number of days in the period divided by inventory turnover over the period.
Days of inventory on hand (DOH)
Sampling error
Economic growth
Earnings yield
39. The analysis of the strength of the linear relationship between two data series.
Statistical inference
Corporate governance
Correlation analysis
Cost of carry model
40. The percentage of a market that a particular fi rm supplies; used as the primary measure of monopoly power.
Market share test
Power of a test
Committed lines of credit
Continuously compounded return
41. A permissible delivery procedure used by futures market participants - in which the long and short arrange a delivery pro-cedure other than the normal procedures stipu-lated by the futures exchange.
Guideline transactions method
Method of comparables
Exchange for physicals (EFP)
Instability in the minimum-variance frontier
42. A bias caused by using information that was not available on the test date.
Holder-of-record date
Look-ahead bias
Intangible assets
Stratified random sampling
43. When liabilities translated at the current exchange rate are greater than assets translated at the current exchange rate. Liabilities exposed to translation gains or losses exceed the exposed assets.
Capitalization rate
Allowance for bad debts
Net liability balance sheet exposure
Interest rate put
44. The value of exports of goods and ser-vices minus the value of imports of goods and services.
Capitalized inventory costs
Interest rate forward
Net exports
U.S. interest rate differential
45. The variability around the central tendenoy.
Reorganization
Free cash flow method
Dispersion
Guideline transactions method
46. The portion of the dependent variable that is not explained by the independent vari-able(s) in the regression.
Strip
Error term
Diluted shares
Option price - option premium - or premium
47. Options that - if exercised - would require the payment of more money than the value received and therefore would not be cur-rently exercised.
Out-of-the-money
North
Clearinghouse
Revenue
48. A model of stock valuation that views intrinsic value of stock as the sum of book value per share plus the present value of the stock's expected future residual income per share.
Orthogonal
Residual income model (RIM) (also discounted ahnormal earnings model or Edwards-Bell-Ohlson model)
Number of days of payables
Lockbox system
49. Analysts who work at brokerages.
Sell-side analysts
Asset retirement obligations (AROs)
Multi-step format
Two-sided hypothesis test (or two-tailed hypothesis test)
50. A graph of a frequency distri-bution obtained by drawing straight lines join-ing successive points representing the class frequencies.
Statement of changes in shareholders' equity (state-ment of owners' equity)
Frequency polygon
Position trader
Debt with warrants
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