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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. A descriptive measure computed from or used to describe a population of data - convention-ally represented by Greek letters.
Parameter
Assets
Controlling interest
Exercise or exercising the option
2. The posi tive square root of tar-get semivar·ance.
Normal contango
Reviewed fmancial statements
Orderly liquidation value
Target semideviation
3. An annuity having a first cash flow that is paid immediately.
Annuity due
Arbitrage portfolio
First-differencing
Addition rule for probabilities
4. Any action other than a tariff that restricts international trade.
Nontariff barrier
Accrued interest
Winsorized mean
Geometric mean
5. An equation describing the expected return on any asset (or portfolio) as a linear function of its beta relative to the market portfolio.
Economic growth rate
Sum-of-the-parts valuation
Capital asset pricing model (CAPM)
Hypothesis
6. 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
Trade receivables (commercial receivables or accounts receivable)
Arbitrage
Statement of retained earnings
Periodic rate
7. A random variable hav-ing the outcomes 0 and 1.
Exchange ratio
Cannibalization
Bernoulli random variable
Constant maturity swap or
8. An estimate of the average time that elapses between paying suppliers for materi-als and collecting cash from the subsequent sale of goods produced.
Net operating cycle
Cost structure
Acquisition method
Contango
9. The average squared deviation below the mean.
Arbitrage portfolio
Semivariance
Vested benefit obligation
First-differencing
10. A means of settling payments in which the amount owed by the first party to the second is netted with the amount owed by the sec-ond party to the first; only the net difference is paid.
Synthetic put
Consolidation
Payment netting
Cnsistent
11. With reference to statistical inference - astatement about one or more populations.
Hypothesis
Stress testing
Payout ratio
Held-for-trading securities (trading securities)
12. In a nonconventional cash flow pattern - the initial outflow is not fol-lowed by inflows only - but the cash flows can flip from positive (inflows) to negative (outflows) again (or even change signs several times).
Legal risk
Nonconventional cash flow
Inventory
Investment strategy
13. An option strategy involving the hold-ing of an asset and sale of a call on the asset.
Covered call
Random number generator
LIFO reserve
Enterprise risk management
14. An international organi-zation that places greater obligations on its mem-ber countries to observe the GATT rules.
Price to cash flow
Covariance matrix
Out-of-the-money
World Trade Organization
15. The set of assets available for investment.
Return on assets (ROA)
Active investment managers
Opportunity set
Float factor
16. A third party that is sough t out bX the tar-get c0mpany's board to Burchase a substantial minority stake in the target-enough to block a hostile takeover without selling the entire company.
White sqnire
Recapture premium
Discount for lack of control
Differential expectations
17. A value against which a computed test statistic is compared to decide whether to reject or not reject the null hypothesis.
Two-sided hypothesis test (or two-tailed hypothesis test)
Rejection point (or critical value)
Quick assets
Bayes' formula
18. Covering or containing all possible outcomes.
Quick assets
Entry price
Total probability rule for expected value
Exhaustive
19. The residuals from a fitted time-series model within the sample period used to fit the model.
In-sample forecast errors
Standardized unexpected earnings (SUE)
Implied yield
Currency option
20. An option in which the holder has the right to make an unknown interest payment and receive a known interest payment.
Deregulation
Held-to-maturity investments
Interest rate put
Total probability rule for expected value
21. ROA) A prof-itability ratio calculated as operating income divided by average total assets.
Statutory merger
Asset-based approach
Ordinal scale
Operating return on assets (operating
22. The standard deviation of the differ-ence in returns between an active investment portfolio and its benchmark portfolio; also called tracking error volatility - tracking risk - and active risk.
Protective put
Tracking error
Principal
Production-flexibility
23. An electronic payment system used widely in Europe and Japan.
Giro system
Translation exposure
Linear association
Gains
24. 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.
Plain vanilla swap
Free cash flow to the
Sarbanes-Oxley Act
Cash conversion cycle (net operating cycle)
25. A merger involving the pur-chase of a target ahead of the acquirer in the value or production chain; for example - to acquire a supplier.
Backward integration
Joint probability
Delta hedge
Caplet
26. The expansion of production pos-sibilities that results from capital accumulation and technological change.
Economic growth
Direct format (direct method)
Asset retirement obligations (AROs)
Return on equity (ROE)
27. Trading ex-dividend refers to shares that no longer carry the right to the next dividend payment.
Markowitz decision rule
Clientele effect
Divestiture
Ex-dividend
28. 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
Market efficiency
Total asset turnover
Complement
Semideviation
29. A quantitative measure that specifies where data are centered.
Justified (fundamental)
Cheapest to deliver
Fixed-income forward
Measure of central tendency
30. The process of systematically allocat-ing the cost of long-lived (tangible) assets to theperiods during which the assets are expected toprovide economic benefits.
Depreciation
Dutch Book theorem
Earnings at risk (EAR)
Historical method
31. The difference between the maximum and minimum values in a dataset.
Priced risk
Scenario analysis
Range
Market share test
32. Observations over individual units at a point in time - as opposed to time-series data.
Horizontal analysis
Cross-sectional data
Other post-employment benefits
Inverse floater
33. When a bankrupt company is allowed to enforce contracts that are favorable to it while walking away from contracts that are unfa-vorable to it.
Cherry-picking
Pure discount instruments
Information ratio (IR)
Receivables turnover
34. Amounts owed to the company from parties other than customers.
Top-down investing
Other receivables
P Value
Economic sectors
35. A regression assumption violation that occurs when two or more independent vari-ables (or combinations of independent variables) are highly but not perfectly correlated with each other.
Long-term liability
Multicollinearity
Minimum-variance portfolio
Covariance
36. In reference to short-term cash management - it is an investment strategy charac-terized by simple decision rules for making daily investments.
Passive strategy
Mutually exclusive projects
Molodovsky effect
Inflation premium
37. 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
Direct debit program
Fair value
Free cash flow
Mesokurtic
38. The difference between operat-ing assets (total assets less cash) and operating lia-bilities (total liabilities less total debt).
Net operating assets
Correlation
Stated annual interest rate or quoted interest rate
Cost approach to value
39. An option that gives the holder the right to sellan underlying asset to another party at a fixedprice over a specific period of time.
Put
Cash flow at risk (CFAR)
Rational efficient markets formulation
Payout ratio
40. With reference to statisti. cal inference - the subdivision dealing with estimating the value of a population parameter.
Theta
Net asset balance sheet exposure
Arbitrage
Estimation
41. An option strategy involving the purchase of two calls and one put.
Sovereign yield spread
Rent seeking
Strap
Accounting profit (income before taxes or pretax income)
42. The principle that dol-lar amounts indexed at the same point in time are additive.
Provision
Cash flow additivity principle
Due diligence
Dividend discount model based approach
43. A measure of sensitivity; the incremental change in one variable with respect to an incre-mental change in another variable.
Minority active investments
Cash equivalents
Elasticity
NPV rule
44. The positive square root of the sample variance.
Leveraged floating-rate note or leveraged floater
Modified duration
Sample standard deviation
Noncurrent
45. Forecasted dividends per share over the next year divided by current stock price.
Combination
Leading dividend yield
Marking to market
Clientele effect
46. A random variable that can take on at most a countable number of possi-ble values.
Variance
Discount for lack of marketability
Operating return on assets (operating
Discrete random variable
47. The change in the bond price for a 1 basis point change in yield. Also called basis point value (BPV).
Present (price) value of a basis point (PVBP)
Book value equity per share
Lower bound
Unidentifiable intangible
48. The risk associated with operating earnings. Operating earnings are uncertain because total revenues and many of the expendi-tures contributed to produce those revenues are uncertain.
Root mean square(l er ror (RMSE)
Futures contract
U.S. official reserves
Business risk
49. An option that gives the holder the right to buy an underlying asset from another party at a fixed price over a specific period of time.
Sector neutralizing
Residual income method (or excess earnings method)
Call
Priced risk
50. Observations through time on a single characteristic of multiple observational units.
Nonparametric test
Panel data
Activity ratios (asset utilization or operating efficiency ratios)
Money market