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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. An ordered listing.






2. The combination of the underlying - puts - calls - and risk-free bonds that replicates a forward contract.






3. 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.






4. A bias caused by using information that was not available on the test date.






5. The evaluation of credit risk; the evaluation of the creditworthiness of a borrower o r counterpar ty.






6. The probability of an event not conditioned on another event.






7. Sales price less disposition costs - amortized mortgage loan bal-ance - and capital gains taxes.






8. Promises by the company to pay benefits in the future - other than pension benefits - such as life insurance premiums and all or part of health care insurance for its retirees.






9. A profitabili ty ratio calcu-lated as EBIT divided by the sum of short-and long-te debt and equi ty.






10. The standard deviation of the differ-ences between a portfolio's returns and its bench-mark's returns; a synonym of active risk.






11. Individual accounts to which an employee and typically the employer makes contributions - generally on a tax-advantaged basis. The amounts of contributions are defined at the outset - but the future value of the benefit is unknown. The employee bears






12. Each component call option in a cap.






13. The part of the execution step of the portfolio management process that involves the implementation of port-folio decisions by trading desks.






14. A company's ability to satisfY its short-term obligations using assets that are most readily con-verted into cash; the ability to trade a futures con-tract - either selling a previously purchased contract or purchasing a previously sold contract.






15. The actual amount paid for income taxes in the period; not a provision - but the actual cash outflow.






16. Analysis that involves com-parisons across individuals in a group over a given time period or at a given point in time.






17. The probability of an event estimated as a relative frequency of occurrence.






18. Assets and liabilities with value equal to the amount of currency con-tracted for - a fixed amount of currency. Examples are cash - accounts receivable - mortgages receiv-able - accounts payable - bonds payable - and mort-gages payable. Inventory is






19. Shares that were issued and subse-quently repurchased by the company.






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. 1) A contract on an interest rate - whereby at periodic payment dates - the writer of the cap pays the difference between the market interest rate and a specified cap rate if - and only if - this differ-ence is positive. This is equivalent to a strea






22. The remaining (undepreciated) bal-ance of an asset's purchase cost. For liabilities - the face value of a bond minus any unamortized dis-count - or plus any unamortized premium.






23. With reference to the presen-tation of expenses in an income statement - the grouping together of expenses serving the same function - e.g. - all items that are costs of good sold.






24. A criterion asserting that the optimal portfolio is the one that minimizes the probability that portfolio return falls below a threshold level.

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25. A normal operating expense that has been paid in advance of when it is due.






26. The hypothesis accepted when the null hypothesis is rejected.






27. The expected return in excess of the risk-free rate for a portfolio with a sensitivity of 1 to one factor and a sensitivity of 0 to all other factors.






28. FRA A contract in which the initial value is intentionally set at a value other than zero and therefore requires a cash payment at the start from one party to the other.






29. Financial statements that are not accompanied by an auditor's opinion letter.

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30. 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






31. 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).






32. An inter-national agreement signed in 1947 to reduce tar-iffs on international trade.






33. The excess of assets over liabilities; the residual interest of shareholders in the assets of an entity after deducting the entity's liabilities.

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34. The price paid to buy an asset.






35. An act passed by the U.S. Congress in 1934 that created the Securi-ties and Exchange Commission (SEC) - gave the SEC authority over all aspects of the securities industry - and empowered the SEC to require peri-odic reporting by companies with public






36. An investment decision rule that accepts projects or investments for which the IRR is greater than the opportunity cost of capital.






37. The sum of market value of common equity - book value of preferred equity - and face value of debt.






38. An average in which each observation is weighted by an index of its relative importance.






39. A profitability ratio calcu-lated as net income divided by average sharehold-ers' equity.






40. The process of accumulating interest on interest.






41. The buyer of a derivative contract. Also refers to the position of owning a derivative.






42. A measure of disper-sion relating to a population in the same unit of measurement as the observations - calculated as the positive square root of the population variance.






43. An illiquidity discount that occurs when an investor sells a large amount of stock rela-tive to its trading volume (assuming it is not large enough to constitute a controlling ownership).






44. Hirschman Index A measure of rna ket concentration that is calculated by summing the squared mar et shares for competing companies in an industry; high HHI readings or mergers that would result in large HHI increases are more likely to result in regu






45. A trend in which the dependent vari-able changes at a constant rate with time.






46. A finan-cial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its oper-ations; equal to days of inventory on hand + days of sales outstanding - number of days of






47. The difference between inventory reported as FIFO and 'nventory reported as LIFO (FIFO inventory value less LIFO inventory val e).






48. Segment profit (loss) divided by seg-ment assets.






49. An annuity with a first cash flow that is paid one period from the present.






50. Nonconvertible - noncallable preferred stock with a specified divi-dend rate that has a claim on earnings senior to the claim of common stock - and no maturity date.