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Test your basic knowledge |
CFA Level2 Vocab
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Study First
Subjects
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
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. A varia-tion ofVAR that reflects credit risk.
Nominal risk-free interest rate
Rho
Liquidity discount
Credit VAR - default VAR - or credit at risk
2. Instruments that payinterest as the difference between the amountborrowed and the amount paid back.
Credit swap
Pure discount instruments
Cash-flow-statement-based accruals ratio
Diluted shares
3. A breakdown of accounts into cate-gories of days outstanding.
Residual claim
Aging schedule
Efficiency
Creative response
4. A solvency ratio calculated as total debt divided by total shareholders' equity.
Top-down analysis
Debt-to-equity ratio
Measurement scales
Credit-linked notes
5. The difference between the observed value of a statistic and the quantity it is intended to estimate.
Shareholders' equity
Buy-side analysts
Time to expiration
Sampling error
6. With reference to investmentselection processes - an approach that involves selection from all securities within a specified investment universe - i.e. - without prior narrowiNg of the universe on the bas' s of macroeconomj c or overall market consid
Carried interest
Bottom-up analysis
Hurdle rate
Fixed costs
7. 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.
Tobin's q
Dividend displacement of earnings
Estimation
Free cash flow to equity
8. A country that is lending more to the rest of the world than it is borrowing from it.
VISibility
Surprise
Retail method
Net lender
9. A balance sheet that does not show subtotals for current assets and current liabilities.
Winner's curse
Degrees of freedom (df)
Forward rate agreement (FRA)
Unclassified balance sheet
10. The return that an investorearns during a specified holding period; a syn-onym for total return.
Cumulative relative frequency
Pyramiding
Per unit contribution margin
Holding period return
11. The required rate of return on com-mon stock.
Annuity due
Credit scoring model
Breakeven point
Cost of equity
12. The risk associated with interest rates - exchange rates - and equity prices.
Continuous time
Pull on liquidity
Market risk
Capture hypothesis
13. The science of describing - analyzing - and drawing conclusions from data; also - a collection of numerical data.
Statistics
Covered interest arbitrage
Leptokurtic
Gross domestic product
14. The amount at which an asset or liability is valued according to account-ing principles.
PEG ratio
Moneyness
Carrying amount (book value)
Initial margin requirement
15. A merger involving compa-nies that are in unrelated businesses.
Foreign currency
Conglomerate merger
Mutually exclusive projects
Noncurrent assets
16. The restatement of financial statement items using a common denominator or reference item that allows one to identify trends and major differences; an example is an income statement in which all items are expressed as a percent of revenue.
Gross domestic product
Common-size analysis
Enhanced derivatives products companies (EDPC)
Income approach
17. A money measure of the mini-mum value of losses expected during a specified time period at a given level of probability.
Value at risk (VAR)
Minority active investments
Grant date
Optimal capital structure
18. Dummy variables used as dependent variables rather than as inde-pendent variables.
Debt incurrence test
Qualitative dependent variables
Cannibalization
Economic order quantity-reorder point
19. The goods and sernces that we buy from people in other countries.
Debit
Imports
Cash flow at risk (CFAR)
Financial leverage
20. Said of a sale in which proceeds are to be paid in installments over an extended period of time.
Time-period bias
Capitalized inventory costs
Installment
Yield beta
21. 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.
Effective annual rate
Delivery
Deliveryoption
Semilogarithmic
22. An increment or premium to value associated with a controlling ownership interest in a company.
Control premium
Taxable temporary differences
Deep in the money
Conditional heteroskedasticity
23. The day that the corporation issues a statement d eclaring a specific dividend.
Poison puts
Uniting of interests method
Split-rate
Declaration date
24. A limit move in the futures market in which the price at which a transaction would be made is at or above the upper limit.
Minimum-variance frontier
Liruit up
Arrears swap
Interval scale
25. The owners of a joint venture. Each is active in the management and shares control of the joint venture.
Credit VAR - default VAR - or credit at risk
Venturers
Dividend displacement of earnings
Homogenization
26. The probability that an asset's value moves down in a model of asset price dynamics.
Cannibalization
Going-concern value
Down transition probability
Implied volatility
27. A bank commitment to extend credit up to a pre-specified amount; the commitment is considered a short-term liability and is usually in effect for 364 days (one day short of a full year).
Population
Comparables (comps - guideline assets - guideline com-panies)
Committed lines of credit
Trailing P/E (or current PIE)
28. Debt with the added feature that the bondholder has the option to exchange the debt for equity at prespecified terms.
Maintenance margin requirement
Stock options (stock option grants)
Continuous random variable
Convertible debt
29. 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.
Compiled f'mancial statements
Unlimited funds
FIFO method
Agency costs
30. A valuation ratio calculated as price per share divided by sales per share.
Capital rationing
Price to sales
Bottom-up investing
Sample kurtosis
31. 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.
Derivative
Diminishing balance method
Warehouse receipt arrangement
Forward integration
32. Desired investment outcomes; includes risk objectives and return objectives.
Investment objectives
Day trader
Efficient portfolio
Investment strategy
33. A random variable that can take on at most a countable number of possi-ble values.
Unexpected earnings (also earnings surprise)
Due diligence
Forward integration
Discrete random variable
34. Agreements made by a company in bankruptcy under which a company's capital struc-ture is altered and/ or alternative arrangements are made for debt repayment; U.S. Chapter II bankruptcy. The company emerges from bank-ruptcyas a going concern.
Theta
Liruit up
Reorganization
Vertical analysis
35. 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.
Interest rate collar
Minority active investments
Forward contract
Payer swaption
36. A measure of the co-movement (linearassociation) between two random variables.
Volatility
Covariance
American
Multivariate distribution
37. The assumption of equal priorprobabilities.
Diffuse prior
Financial analysis
Contingent clain
Sampling plan
38. With reference to a time series - the underly-ing model generating the times series.
Multivariate distribution
U.S. GAAP and uniting of interests under IFRS
Investing activities
Regime
39. A tabular display of data summarized into a relatively small number of intervals.
Cherry-picking
Taxable temporary differences
Frequency distribution
Cumulative relative frequency
40. A set of observations on a variable's out-comes in different time periods.
Time series
Lockbox system
Tenor
Normalized earnings per share (or normal earnings per share)
41. Above average or abnormally high growth rate in earnings per share.
Payment date
Commodity option
Supernormal growth
Linear interpolation
42. A qualitative-dependent-variable multi-ple regression model based on the logistic proba-bility distribution.
Vega
Logit model
Legislative and regulatory risk
Guideline public company method
43. Not symmetrical.
Skewed
Marketability discount
Subsistence real wage rate
Monetary assets and liabilities
44. The combining of the results of oper-ations of subsidiaries with the parent compaIL y to present financial statements as if they were a sin-gle economic unit. The asset - iabilities - revenues and expenses of the subsidiaries are combined with those
Consolidation
Dividend discount model based approach
Capital allocation line (CAL)
Sandwich spread
45. The smaller the stake that managers have in the company - the less is their share in bearing the cost of excessive perquisite consumption or not giving their best efforts in running the company.
Minority passive investments (passive investments)
Molodovsky effect
Debtor nation
Agency costs of equity
46. The portion of the dependent variable that is not explained by the independent vari-able(s) in the regression.
Poison puts
Error term
Takeover
Screening
47. The number of observations in a given interval (for grouped data) .
Absolute frequency
Cap
Index amortizing swap
Accelerated methods of depreciation
48. Netting the market values of all derivative contracts between two parties to deter-mine one overall value owed by one party to another in the event of bankruptcy.
Impairment
Longitudinal data
Historical method
Closeout netting
49. A dollar deposited outside the United States.
Eurodollar
Translation exposure
Bootstrapping earnings
Sandwich spread
50. A time series that is not covariance station-ary is said to have a unit root.
Unit root
Flip-in pill
Vertical common-size analysis
Fixed exchange rate