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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. American Free Trade Agreement An agree-ment - which became effective on January 1 - 1994 - to eliminate all barriers to international trade between the United States - Canada - and Mexico after a 15-year phasing-in period.






2. A corporate transac-tion in which management repurchases all out-standing common stock - usually using the proceeds of debt issuance.






3. The average squared deviation below the mean.






4. The strategy of using futures contracts to enter the market without an immediate outlay of cash.






5. The after-tax net operating profits as a percent of total assets or capital.






6. The sale - liquidation - or spin-off of a d'vi-sion or subsidiary.






7. In probability - with reference to an event 5 - the event that 5 does not occur; in eco-nomics - a good that is used in conjunction with another good.






8. The amount to which a payment or series of payments will grow by a stated future date.






9. A synonym for robust standard errors.






10. Potential future payments to the seller that are contingent on the achieve-ment of certain agreed on occurrences.






11. The assumption of equal priorprobabilities.






12. A comparison of revenues with working capital to produce a measure that shows how efficiently working capital is employed.






13. A financial state-ment that reconciles beginning-of-period ana end-of-period balance sheet values of retained income; shows the linkage between the balance sheet and income statement.






14. 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.






15. Provision for a return of invest-ment - net of value appreciation.






16. An option in which the holder has the right to make a known interest payment and receive an unknown interest payment.






17. A procedure for determining the interest on a loan or bond in which the interest is deducted from the face value in advance.






18. 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.






19. The change in the bond price for a 1 basis point change in yield. Also called basis point value (BPV).






20. When settling a contract - the risk that one party could be in the process of paying the counterparty while the counterparty is declar-ing bankruptcy.






21. An approach to trading that uses pairs of closely re ated stocks - buying the relatively undervalued stock and selling short the relatively overvalued stock.






22. The competitive strategy of offeringunique products or services along some dimen-sions that are widely valued by buyers so that thefirm can command premium prices.






23. A set of observations on a variable's out-comes in different time periods.






24. A function that specifies the probability that the random variable takes on a specific value.






25. A valuation multiple that relates the total market value of all sources of a company's capital (net of cash) to a measure of fundamental value for the entire company (such as a pre-interest earnings measure).






26. Any departure of the market price of an asset from the asset's estimated intrinsic value.






27. Reward-to-volatility ratio; ratio of portfolio excess return to standard deviation.


28. A variation of the market approach; establishes a value estimate based on pricing multiples derived from the acquisition of control of entire public or private companies that were acquired.






29. The company's total cost of capital in money terms.






30. In reference to corporate taxes - a system that imputes - or attributes - taxes at only one level of taxation. For countries using an imputation tax system - taxes on dividends are effectively levied only at the shareholder rate. Taxes are paid at th






31. Method of accounting in which the effect of transactions on financial condition and income are recorded when they occur - not when they are settled in cash.






32. A method of revenue recognition in which - in each accounting period - the company estimates what percentage of the contract is complete and then reports that per-centage of the total contract revenue in its income statement.






33. A profitability ratio calculated as (net income - preferred divi-dends) divided by average common equity; equal to the return on equity ratio when no preferred equity is outstanding.






34. A dividend yield based on the anticipated dividend during the next 12 months.






35. 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.






36. I) An interest rate swap involving two floating rates. 2) A swap in which both parties pay a floating rate.






37. A combination of a European call and a risk-free bond that matures on the option expiration day and has a face value equal to the exer-cise price of the call.






38. In reference to mergers - it is the savings achieved through the consolidation of operations and elimination of duplicate resources.






39. Method used to estimate the overall capitalization rate by dividing the sale price of a comparable income property into the net operating income.






40. The naturalloga-rithm of 1 plus the holding period return - or equivalently - the natural logarithm of the ending price over the beginning price.






41. A scheme of measuring differ-ences. The four types of measurement scales are nominal - ordinal - interval - and ratio.






42. A portfolio having factor sensitiv-ities that are matched to those of a benchmark or other portfolio.






43. The value of a company if the com-pany were dissolved and its assets sold individually.






44. The market for short-term debt instruments (one-year maturity or less).






45. A stock's current mar-ket price divided by the most recent four quarters of earnings per share.






46. The required rate of return on com-mon stock.






47. The portion of an entity's income that is subject to income taxes under the tax laws of its jurisdiction.






48. A type of subsidiary engaged in derivatives trans-actions that is separated from the parent company in order to have a higher credit rating than the parent company.






49. The value of an option at expiration.






50. A weighted average of the after-tax required rates of return on a company's common stock - preferred stock - and long-term debt - where the weights are the fraction of each source of financing in the company's target capital structure.