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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.
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. An activity ratio calculated as cost of goods sold divided by average inventory.
Definition of value (or standard of value)
Default risk premium
Inventory turnover
Time value of money
2. The accounting principle that expenses should be recognized when the associ-ated revenue is recognized.
Face value (also principal - par value - stated value - or maturity value)
Exports
Investment constraints
Matching principle
3. A general strategy usually thought of as reducing - if not eliminating - risk.
Hedging
Mean reversion
Unconditional heteroskedasticity
Eurodollar
4. A quoted interest rate that does not account for compounding within the year.
Marketability discount
Value at risk (VAR)
NTM P/E
Stated annual interest rate or quoted interest rate
5. Degree of peakedness (fatness of tails) in excess of the peakedness of the normal distribution.
Inverse floater
Asset-based approach
Excess kurtosis
Agency relationships
6. Estimate of the aver-age number of days it takes to collect on credit accounts.
Discrete time
Adjusted R2
Number of days of receivables
Allowance for bad debts
7. The probability-weighted average of the possible outcomes ofa random variable.
Expected value
Underlying earnings (or persistent earnings - continu-ing earnings - or core earnings)
Chain rule of forecasting
Drag on li
8. A present value model of stock value that views the intrinsic value of a stock as present value of the stock's expected future dividends.
Dividend discount model (DDM)
Dividend displacement of earnings
World Trade Organization
Survivorship bias
9. With reference to regression errors - errors that are correlated across observations.
Money-weighted rate of return
Serially correlated
Underlying earnings (or persistent earnings - continu-ing earnings - or core earnings)
Rule of 72
10. Probabilities reflecting beliefs prior to the arrival of new information.
Prior probabilities
Business risk
U.S. official reserves
Estimate
11. A result in probability theory stating that inconsistent probabilities create profit opportunities.
Balance sheet ratios
Dutch Book theorem
Gross income multiplier (GIM)
Capital budgeting
12. The risk that environmental - social - or governance risk fac tors will result in significant costs or other losses to a company and its share-holders; the risk arising from a company's obliga-tion to meet required payments under its financ-ing agree
Standard cost
Interest rate swap
Financial risk
Dirty surplus accounting
13. The single-period interest rate for a completely risk-free security if no infla-tion were expected.
Cross-sectional analysis
Sample selection bias
Real risk-free interest rate
Long-term debt-ta-assets ratio
14. The probability of an event not conditioned on another event.
Arrears swap
Unconditional probability (or marginal probability)
Kurtosis
Dirty surplus accounting
15. The preference some investors have for shares that exhibit certain characteristics.
Statistic
Cash conversion cycle (net operating cycle)
Clientele effect
Long-term equity anticipatory securities (LEAPS)
16. PIE PI Es based on normalized EPS data.
Accrued expenses (accrued liabilities)
Normalized
Off-balance sheet imancing
Safety-first Rules
17. Provision for a return of invest-ment - net of value appreciation.
Underlying
Scenario analysis
Cost averaging
Recapture premium
18. Ratios that measure a company's ability to generate profitable sales from its resources (assets).
Profitability ratios
Regression coefficients
Sample standard deviation
Platykurtic
19. A perpetual annuity - or a set of never-ending level sequential cash flows - with the first cash flow occurring one period from now.
Perpetuity
Installment
Creditworthiness
Double-entry accounting
20. An inventory account-ing method that identifies which specific inventory items were sold and which remained in inventory to be carried over to later periods.
Estimate
Liquidity
Trade-weighted index
Specific identification method
21. A graph of a frequency distri-bution obtained by drawing straight lines join-ing successive points representing the class frequencies.
Bottom-up investing
Orthogonal
Interest rate floor or floor
Frequency polygon
22. A pre-offer takeover defense mech-anism involving the corporate charter (e.g. - stag-gered boards of directors and supermajority provisions) .
Reconciliation
Risk-neutral probabilities
Per unit contribution margin
Shark repellents
23. With respect to revenue recognition - a method that s ecifies that the portion of the total profit of the sale that . s recognized in each pe riod is deter-mined by the percentage of the total sales price for which the seller has received cash.
Forward P/E (also leading P/E or prospective P/E)
Installment method (installment-sales method)
Rho
Floating-rate loan
24. A widely used approach to estimate an overall capitalization rate. It is based on the premise that debt and equity financ-ing is typically involved in a real estate transaction.
Positive serial correlation
Net asset balance sheet exposure
Band-of-investment method
Top-down analysis
25. Estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.
Market price of risk
Net realizable value
Subjective probability
Sample variance
26. A value against which a computed test statistic is compared to decide whether to reject or not reject the null hypothesis.
Target balance
Reverse stock split
Off-market
Rejection point (or critical value)
27. The amount of money that a trader deposits in a margin account. The term is derived from the stock market practice in which an investor bor-rows a portion of the money required to purchase a certain amount of stock. In futures markets - there is no b
Active specific risk or asset selection risk
Ordinary shares (common stock or common shares)
Margin
A priori probability
28. A measurement scale that has all the characteristics of interval measurement scales as well as a true zero point as the origin.
Investment objectives
Heteroskedasticity
Convertible debt
Ratio scales
29. The internal rate of return on a portfol io - taking account of all cash flows.
Money-weighted rate of return
Liruit down
Pairs arbitrage trade
Pure discount instruments
30. Orders to buy or sell that are too large for the liquidity ordinarily available in dealer networks or stock exchanges.
Block
Accumulated benefit obligation
Cash flow additivity principle
Macaulay duration
31. A procedure for determining the interest on a loan or bond in which the interest is deducted from the face value in advance.
Multi-step format
Discount interest
Market risk premium
Static trade-off theory of capital structure
32. An option strategy involving the purchase of one option and sale of another option that is identical to the first in all respects except either exercise price or expiration.
Spread
Mean absolute deviation
Regression coefficients
Takeover
33. In using the method of com parables - the value of a price mul-tiple for the comparison asset; when we have com-parison assets (a group) - the mean or median value of the multiple for the group of assets.
Combination
Forward price or forward rate
Stated rate (nominal rate or coupon rate)
Benchmark value of the multiple
34. Costs of research and development in progress atan acquired company; often - part of the purchaseprice of an acquired company is allocated to suchcosts.
Full price
Purchased in-process research and development costs
Terminal price multiple
Income statement (statement of operations or profit and loss statement)
35. The smallest level of significance at whichthe null hypothesis can be rejected; also called themarginal significance level.
P Value
Cost of capital
Bonding costs
Residual autocorrelations
36. Serial correlation in which a positive error for one observation increases the chance of a positive error for another observation - and a negative error for one observation increases the chance of a negative error for another observation.
Positive serial correlation
Random number generator
Unbiasedness
Level of significance
37. An extra return that compen-sates investors for the risk of loss relative to an investment's fair value if the investment needs to be converted to cash quickly.
Cap
Liquidity premium
Economic order quantity-reorder point
Empirical probability
38. For accounting purposes - the spot exchange rate on the balance sheet date.
Liruit up
Current exchange rate
Residual autocorrelations
Exp ected holding-period return
39. A principle stating that the pr:obability that A or B occurs (both occur) equals he probabili ty thab A occ rs - plus the probabir ty tha~ B occurs - minus the probabil-ity that both A and B occur.
Balance-sheet-based aggregate accruals
Value
Addition rule for probabilities
Diluted shares
40. FIrm model A model of stock valuation that views the value of a firm as the pres-ent value of expected future free cash flows to the firm.
Cost averaging
Free cash flow to the
Defined-contribution pension plans
Dividend displacement of earnings
41. 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.
Flip-over pill
Continuously compounded return
Pure discount instruments
Method of comparables
42. A portfolio offering the highest expected return for a given level of risk as mea-sured by variance or standard deviation of return.
Relative dispersion
Active factor risk
Efficient portfolio
Asian call option
43. An annuity with a first cash flow that is paid one period from the present.
Grouping by function
Ordinary annuity
Adjusted beta
Rule of 72
44. A situation in a futures market where the current futures price is greater than the current spot price for the underlying asset.
Strangle
Contango
Bottom-up forecasting approach
Level of significance
45. A value at or below which a stated fraction of the data lies.
Simple random sample
Quantile (or fractile)
Compiled f'mancial statements
Credit analysis
46. Dummy variables used as dependent variables rather than as inde-pendent variables.
Legislative and regulatory risk
Qualitative dependent variables
Sample kurtosis
Earnings at risk (EAR)
47. The variance of one variable - given the outcome of another.
Sampling plan
Conditional variances
Bond-equivalent yield
Gross profit argin
48. The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or groups of assets.
Cash-generating unit
Cost averaging
Risk-neutral probabilities
World Trade Organization
49. A time series that is not covariance station-ary is said to have a unit root.
Number of days of payables
Unit root
Discrete random variable
Money-weighted rate of return
50. Temporary differ-ences that result in a taxable amount in a future period when determining the taxable profit as the balance sheet item is recovered or settled. t-Distribution A symmetrical distribution defined by a single parameter - degrees of free
Earnings per share
Company share-related factors
Data mining
Taxable temporary differences