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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. A spontaneous form of credit in which a purchaser of the goods or service is financing its purchase by delaying the date on which payment is made.






2. A test in which the null hypothesis is rejected in favor of the alternative hypothesis if the evidence indicates that the population param-eter is either smaller or larger than a hypothe-sized value.






3. A combination of interest rate put options designed to hedge a lender against lower rates on a floating-rate loan.






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






5. The price paid to buy an asset.






6. The rate at which periodic interest payments are calculated.






7. The risk associated with interest rates - exchange rates - and equity prices.






8. The risk associated with the pos-sibility that a payment due at a later date will not be made.






9. An operating segment or one level below an operating segment (referred to as a component) .






10. A quantitative measure that specifies where data are centered.






11. The amount of cash payable by a company to the bondholders when the bonds mature; the promised payment at maturity sepa-rate from any coupon payment.






12. The process of selecting - evaluat-ing - and interpreting financial data in order to formulate an assessment of a company's present and future financial condition and performance.






13. The present discounted value of future cash flows: For assets - the present dis-counted value of the future net cash inflows that the asset is expected to generate; for liabilities - the present discounted value of the future net cash outflows that a






14. A strategy in which a position is hedged by making frequent adjustments to the quantity of the instrument used for hedging in relation to the instrument being hedged.






15. A European-style option with a value at maturity equal to the difference between the stock price at maturity and the average stock price during the life of the option - or $0 - whichever is greater.






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






17. The rate of return that suppliers ofcapital require as compensation for their contri-bution of capital.






18. A swap in which the floating payments have an upper limit.






19. With respect to hypothesis testing - the rule according to which the null hypothesis will be rejected or not rejected; involves the compari-son of the test statistic to rejection point(s).






20. An estimate of a parameter that involves combining (pooling) observations from two or more samples.






21. The positive square root of the variance; a measure of dispersion in the same units as the original data.






22. An approach to using price multiples that relates a price multiple to forecasts of fundamentals through a discounted cash flow model.






23. The ratio of cash dividends paid to earnings for a period.






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






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






26. 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.






27. A transaction executed inthe foreign exchange market in which a currencyis purchased (sold) and a forward contract is sold(purchased) to lock in the exchange rate forfuture delivery of the currency. This transactionshould earn the risk-free rate of t






28. The amount of money a buyer pays and seller receives to engage in an option transaction.






29. The rate at which an option's time value decays.






30. Assets and liabili-ties that are not monetary assets and liabilities. Nonmonetary assets include inventory - fixed assets - and intangibles - and nonmonetary liabili-ties include deferred revenue.






31. Observations of a variable over time.






32. A multifactor model in which the factors are attributes of stocks or com-panies that are important in explaining cross-sectional differences in stock prices.






33. Each component call option in a cap.






34. The date that employees can first exer-cise stock options; vesting can be immediate or over a future period.






35. An act passed by the U.S. Con-gress in 2002 that created the Public Company Accounting Oversight Board (PCAOB) to oversee auditors.






36. With reference to the cash flow statement - a format for the presentation of the statement in which cash flow from operat-ing activities is shown as operating cash receipts less operating cash disburseme ts.






37. Under U.S. GAAP - a mea-sure used in estimating a defined-benefit pension plan's liabilities - defined as the 'actuarial present value of vested benefits.'






38. Economic characteristics of a busi-ness such as profitability - financial strength - and risk.






39. Options that relate to investment deci-sions such as the option to time the start of a proj-ect - the option to adjust its scale - or the option to abandon a project that has begun.






40. An activity ratio equal to the number of days in a period divided by the inventory ratio for the period; an indication of the number of days a company ties up funds in inventory.






41. The revaluation of a financial asset or liability to its current market value or fair value.






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






43. An acquisition in which the acquirer gives the target company's shareholders some combination of cash and securities in exchange for shares of the target company's stock.






44. An estimate of the equity risk pre-mium that is based upon estimates provided by a panel of finance experts.






45. The U.S. interest rate minus the foreign interest rate.






46. A purchase involving a buyer having essentially no material synergies with the target (e.g. - the purchase of a private company by a company in an unrelated industry or by a private equity firm would typically be a financial transaction) .






47. A financial covenant made in conjunction with existing debt that restricts a company's ability to incur additional debt at the same seniority based on one or more financial tests or conditions.






48. The value per share of a no-growth company - equal to the expected level amount of earnings divided by the stock's req uired rate of return.






49. Describes two time series that have a long-term financial or economic relationship such that they do not diverge from each other without bound in the long run.






50. A forward contract in which the underlying is a foreign currency.