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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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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. 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.
Project sequencing
Purchasing power gain
Deliveryoption
Purchasing power parity
2. The posi tive square root of tar-get semivar·ance.
Imputation
Money-weighted rate of return
Target semideviation
Bear hug
3. Futures contracts in which the underlying is a stock - bond - or currency.
Financial futures
Absolute frequency
Normal distribution
Plain vanilla swap
4. Lack of bias. A desirable property of estimators - an unbiased estimator is one whose expected value (the mean of its sampling distri-bution) equals the parameter it is intended to estimate.
Grouping by function
Ratio scales
Unbiasedness
Credit VAR - default VAR - or credit at risk
5. A valuation ratio calculated as price per share divided by sales per share.
Debt ratings
Absolute dispersion
Price to sales
Float factor
6. A decision rule for choos-ing between two investments based on their means and variances.
Probability function
Markowitz decision rule
Segment debt ratio
Common size statements
7. In accounting contexts - cash on hand (e.g. - petty cash and cash not yet deposited to the bank) and demand deposits held in banks and similar accounts that can be used in payment of obligations.
Arbitrage opportunity
Cash
Fair value
Leading dividend yield
8. As used in option pricing - the standard deviation of the continuously compounded returns on the underlying asset.
Scatter plot
Volatility
Positive serial correlation
Sovereign yield spread
9. The probability of correctly rejecting the null-that is - rejecting the null hypothesis when it is false.
Clean surplus relation
Lower bound
Bond equivalent yield
Power of a test
10. A type of qualitative variable that takes on a value of 1 if a particular condition is true and 0 if that condition is false.
Linear association
Asset-based approach
Dummy variable
Passive portfolio
11. Aka also enterprise risk management.
Addition rule for probabilities
White-corrected standard errors
Centralization permits economies of scale and allows a company to use some of its risks to offset other risks.
Bundling
12. A forward contract in which the underlying is a foreign currency.
Fiduciary call
Power of a test
Currency forward
Rho
13. A varia-tion ofVAR that reflects credit risk.
Free cash flow hypothesis
Growth phase
Credit VAR - default VAR - or credit at risk
Bundling
14. Ratios that measure a company's ability to generate profitable sales from its resources (assets).
Interest rate collar
Profitability ratios
PEG ratio
Covered call
15. The stage of growth between the growth phase and the mature phase of a company in which earnings growth typically slows.
Credit swap
Target company - or target
Transition phase
Management buyout (MBO)
16. An option contract that can be exercised at any time until its expiration date.
Long-term liability
Effective annual rate
Nonparametric test
American option
17. The relationship between the option price and the underlying price - which reflects the sensi-tivity of the price of the option to changes in the price of the underlying.
Delta
Diluted earnings per share (diluted
Common-size analysis
Poison puts
18. An approach to valuation that involves using a price multiple to evaluate whether an asset is relatively fairly valued - rela-tively undervalued - or relatively overvalued when compared to a benchmark value of the multiple.
Method of comparables
Acquisition method
Moneyness
Abandonment option
19. A finan-cial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its oper-ations; equal to days of inventory on hand + days of sales outstanding - number of days of
Cash conversion cycle (net operating cycle)
First-differencing
Merger
Univariate distribution
20. The Eurodollar rate at which London banks lend dollars to other London banks; considered to be the best representative rate on a dollar borrowed by a private - high-quality borrower.
Spin-off
Exchange ratio
London Interbank Offer Rate (LIBOR)
Long
21. Valuation approach that values an asset as the present discounted value of the income expected from it.
Tree diagram
Income approach
Earnings expectation management
Money market yield (or CD equivalent yield
22. ROA) A prof-itability ratio calculated as operating income divided by average total assets.
Operating return on assets (operating
Standardized unexpected earnings (SUE)
Income approach
Poison puts
23. A distribution that specifies the probabilities of a random variable's possible outcomes.
Fixed costs
Probability distribution
Market risk premium
Giro system
24. A result indicating that the null hypothesis can be rejected; with reference to an estimated regression coefficient - frequently understood to mean a result indicating that the corresponding population regression coefficient is different from O.
Stock grants
Statistically significant
Current credit risk
Theory of contestable markets
25. A transaction in which a position in the underlying is protected by buying a put and selling a call with the premium from the sale of the call offsetting the premium from the purchase of the put. It can also be used to protect a floating-rate borrowe
Nominal scale
Synthetic forward contract
Corporation
Zero-cost collar
26. The day that the company actually mails out (or electronically transfers) a dividend payment.
Interest rate put
Market-oriented investors
Payment date
Accounts receivable turnover
27. Transactions that are denominated in a currency other than a com-pany's functional currency.
Simple random sample
Foreign currency transactions
Semideviation
Adjusted beta
28. A solvency ratio calculated as total debt divided by total assets.
Debt-to-assets ratio
Aging schedule
Weighted-average cost of capital (WACC)
Conglomerate merger
29. The risk associated with changes in the relative attractiveness of products and services offered for sale - arising out of the competitive effects of changes in exchange rates.
LIFO reserve
Economic exposure
Permanent differences
Capital account
30. An agreement allowing the lessee to use some asset for a period of time; essentially a rental.
Net liability balance sheet exposure
U.S. GAAP and uniting of interests under IFRS
Implied repo rate
Operating lease
31. Asset outflows not directly related to the ordi-nary activities of the business.
Losses
Cost of equity
Impairment of capital rule
Net borrower
32. The expansion of production pos-sibilities that results from capital accumulation and technological change.
Economic growth
Comparative advantage
Residual dividend approach
Amortization
33. A transformation that subtracts the value of the time series in period t - 1 from its value in period t.
First-differencing
Out-of-sample forecast errors
Classified balance sheet
Rate of return
34. A measurement scale that categorizes data but does not rank them.
Nominal scale
Sunk cost
Positive serial correlation
White sqnire
35. A contract signed by both parties to a merger that clarifies the details of the transaction - including the terms - war-ranties - conditions - termination details - and the rights of all parties.
Business risk
Hurdle rate
Market efficiency
Definitive merger agreement
36. Earnings per share divided by price; the reciprocal of the PIE ratio.
Interest rate forward
Lemons problem
Earnings yield
Adjusted beta
37. The capital structure at which the value of the company is maximized.
Normal backwardation
Population variance
Posterior probability
Optimal capital structure
38. With reference to a sample - the mean of the absolute values of deviations from the sample mean.
Gamma
Nominal rate
Mean absolute deviation
Vesting date
39. Financial instru-ments that an entity chooses to measure at fairvalue per lAS 39 or SFAS 159. Generally - the elec-tion to use the fair value option is irrevocable.
Point of sale
Degree of operating leverage (DOL)
Cash flow from operations (cash flow from operating activities or operating cash flow)
Designated fair value instruments
40. The margin requirement on any day other than the first day of a transaction.
Breakeven point
Historical exchange rates
Likelibood
Maintenance margin requirement
41. 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.
Creditworthiness
Intrinsic value or exercise value
Forward swap
LIFO layer liquidation (LIFO liquidation)
42. The feature of a futures contract giv-ing the short the right to make decisions about what - when - and where to deliver.
Industry structure
Investment objectives
Deliveryoption
Cash price or spot price
43. The analysis of the total variability of a dataset (such as observations on the dependent variable in a regression) into components representing different sources of variation; with reference to regression - ANOVA provides the inputs for an F-test of
Credit VAR - default VAR - or credit at risk
Analysis of variance (ANOVA)
Financial leverage ratio
Number of days of receivables
44. The unsold units of product on hand.
Inventory
Univariate distribution
Normalized earnings per share (or normal earnings per share)
Drag on li
45. A rule explaining the expected value of a random vari-able in terms of expected values of the random variable conditional on mutually exclusive and exhaustive scenarios.
Total probability rule for expected value
Breakeven point
Free cash flow method
Economic exposure
46. The difference between the market price of the option and its intrinsic value - determined by the uncertainty of the underlying over the remaining life of the option.
Time value or speculative value
Longitudinal data
Interest rate parity
Risk budgeting
47. The fixed rate at which the holder of an interest rate option can buy or sell the underlying.
Fixed exchange rate
Exercise rate or strike rate
Implied yield
Analysis of variance (ANOVA)
48. The risk of a change in value of a n asset or liability denomi-nated in a foreign currency due to a change in exchange rates.
Reputational risk
Out-of-sample forecast errors
Interquartile range
Exposure to foreign exchange risk
49. The money of other countries regardless of whether that money is in the form of notes - coins - or bank deposits.
ecurity market line (SML)
Survivorship bias
Credit
Foreign currency
50. A measure of a bond's price sen-sitivity to interest rate movements. Equal to the Macaulay duration of a bond divided by one plus its yield to maturity.
Monetary/nonmonetary method
Modified duration
Focus
Fixed exchange rate