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CFA Level2 Vocab

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. The average exchange rate - with individual currencies weighted by their importance in U.S. international trade.






2. A transaction in exchange-listed deriva-tive markets in which a party re-enters the market to close out a position.






3. The difference between the yield on a bond and the yield on a default-free security - usu-ally a government note - of the same maturity. The yield spread is primarily determined by the mar-ket's perception of the credit risk on the bond.






4. The differ-ence between reported net income on an accrual basis and the cash flows from operating and investing activities compared to the average net operating assets over the period.






5. In the context of customer receipts - the amount of money that is in transit between pay-ments made by customers and the funds that are usable by the company.






6. An option in which the underlying value equals the exercise price.






7. Under IFRS - the liability of a defined benefit pension.






8. Profits lost from not having suffi-cient inventory on hand to satisfy demand.






9. CMT A hypothetical U.S. Treasury note with a constant maturity. A CMT exists for various years in the range of 2 to






10. A random variable that can take on at most a countable number of possi-ble values.






11. 1) The simultaneous purchase of an undervalued asset or portfolio and sale of an over-valued but equivalent asset or portfolio - in order to obtain a riskless profit on the price differential. Taking advantage of a market inefficiency in a risk-free






12. The portion of the dependent variable that is not explained by the independent vari-able(s) in the regression.






13. A valuation ratio calculated as price per share divided by book value per share.






14. The strongest form of short-term bank borrowing facilities; they are in effect for multiple years (e.g. - 3-5 years) and may have optional medium-term loan features.






15. Time thought of as advancing in dis-tinct finite increments.






16. Factors that affect the average returns of a large number of different assets.






17. A finance perspective on capital markets that deals with the relationship of price to intrinsic value. The traditional efficient mar-kets formulation asserts that an asset's price is the best available estimate of its intrinsic value. The rational ef






18. The evaluation of credit risk; the evaluation of the creditworthiness of a borrower o r counterpar ty.






19. A procedure for determining the interest on a bond or loan in which the interest is added onto the face value of a contract.






20. The probability that an asset's value moves down in a model of asset price dynamics.






21. A test of a strategy or model using a sample outside the time period on which the strategy or model was developed.






22. With reference to events - the propertythat the occurrence of one event does not affect the probability of another event occurring.






23. An unlimited funds environment assumes that the company can raise the funds it wants for all profitable projects simply by paying the required rate of return.






24. The use of inventory as collat-eral for a loan. Though the lender has claim to some or all of the company's inventory - the com-pany may still sell or use the inventory in the ordi-nary course of business.






25. Observations on characteristic(s) of the same observational unit through time.






26. Under U.S. GAAP - a measure used in estimating a defined-benefit pen-sion plan's liabilities - defined as 'the actuarial present value as of a date of all benefits attributed by the pension benefit formula to employee ser-vice rendered prior to that






27. A swaption that allows the holder to enter into a swap as the fixed-rate payer and floating-rate receiver.






28. A reduction or discount to value that reflects the lack of depth of trading or liquid-ity in that asset's market.






29. A guarantee from the clear-inghouse that if one party makes money on a transaction - the clearinghouse ensures it will be paid.






30. A multivariate classification technique used to discriminate between groups - such as companies that either will or will not become bankrupt during some time frame.






31. Aka 'Residual income.'






32. An option strategy that combines a bull spread and a bear spread having two differentexercise prices - which produces a risk-free payoffof the difference in the exercise prices.






33. Serial correlation in which a positive e rror for one observation increases the chance of a negative error for another observation - and vice versa.






34. A long-term pattern of movement in a partic-ular direction.






35. A profitability ratio calcu-lated as net income divided by average total assets; indicates a company's net profit generated per dollar invested in total assets.






36. A loan in which the interest rate is reset at least once after the starting date.






37. The use of fixed costs in operations.






38. The part of the execution step of the portfolio management process that involves the implementation of port-folio decisions by trading desks.






39. The portfolio that exploits an arbitrage opportunity.






40. A person or country has a comparative advantage in an activi ty if that person or country can perform the activity at a lower opportunity cost than anyone else or any other country.






41. Quantiles that divide a distribution into five equal parts.






42. The ratio of the percentage change in net income to the percent-age change in operating income; the sensitivity ofthe cash flows available to owners when operating income changes.






43. An agreement between two parties in which one party - the buyer - agrees to buy from the other party - the seller - an underlying asset at a later date for a price established at the start of the contract.






44. Linear regression involv-ing two or more independent variables.






45. Net earnings avail-able to common shareholders (i.e. - net income minus preferred dividends) divided by the weighted average number of common shares out-standing during the period.






46. A reserve created against deferred tax assets - based on the likelihood of realizing the deferred tax assets in future account-ing periods.






47. A measure of central tendency computed by taking the nth root of the product of n non-negative values.






48. An ordered listing.






49. A poison pill provision that allows for the redemption or cancellation of a poi-son pill provision only by a vote of coNtinuing directors (generally directors who were on the tar-get company's board p rior to the takeover attempt) .






50. The share price at a particular point in the future.






Can you answer 50 questions in 15 minutes?



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