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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. Bias that may result when failed or defunct companies are excluded from member-ship in a group.






2. A specialized computer program or a spreadsheet that solves for the portfolio weights that will result in the lowest risk for a specified level of expected return.






3. A measure of an option-free bond's aver-age maturity. Specifically - the weighted average maturity of all future cash flows paid by a security - in which the weights are the present value of these cash flows as a fraction of the bond's price. A measu






4. An option in which the asset underlying the futures is a commodity - such as oil - gold - wheat - or soybeans.






5. The concept that dividends paid now displace earnings in all future periods.






6. Asset outflows not directly related to the ordi-nary activities of the business.






7. A measure of correlation applied to ranked data.






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






9. Net earnings avail-able to common shareholders (i.e. - net income minus preferred dividends) divided by the weighted average number of common shares out-standing during the period.






10. When a company is acquired and the purchase price is less than the fai r value of the net assets. The current treatment of the excess of fair value over the purchase price is diffe re t under IFRS and U.S. CAAP. The excess is never accounted for as n






11. A condition in the futures markets in which the price at which a transaction would be made is at or beyond the price limits.






12. The percentage of total earnings paid out in dividends in any given year (in per-share terms - DPS/ EPS).






13. Members ips in a derivatives exchange.






14. The stage of growth between the growth phase and the mature phase of a company in which earnings growth typically slows.






15. Also called present value of a basis point or price value of a basis point (PVBP) - the change in the bond price for a I basis point change in yield.






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






17. The fair value of the estimated costs to be incurred at the end of a tangible asset's service life. The fair value of the liability is determined on the basis of discounted cash flows.






18. The intercept and slope coefficient(s) of a regression.






19. Heteroskedasticity of the error term that is not correlated with the values of the independent variable(s) in the regression.






20. The costs of holding an asset - generally a function of the physical char-acteristics of the underlying asset.






21. A function giving the probability that a random variable is less than or equal to a specified value.






22. 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.






23. An annuity having a first cash flow that is paid immediately.






24. Standard errors of the esti-mated parameters of a regression that correct for the presence of heteroskedastici ty in the regres-sion's error te






25. A method of presentation of accounting transactions in which effects on assets appear at the left and effects on liabilities and equity appear at the right of a central dividing line; also known as T-account format.






26. A form of active strategy which entails scheduling maturities on a systematic basis within the investment portfolio such that invest-ments are spread out equally over the term of the ladder.






27. 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.






28. A measurement scale that has all the characteristics of interval measurement scales as well as a true zero point as the origin.






29. A distribution that specifies the probabilities of a random variable's possible outcomes.






30. The price for immediate purchase of the underlying asset.






31. A purchase involving a buyer that would benefit from certain synergies associ-ated with owning the target firm.






32. A long-term pattern of movement in a partic-ular direction.






33. The relationship amongputs - calls - and forward contracts.






34. A qualitative-dependent-variable multi-ple regression model based on the logistic proba-bility distribution.






35. A strategic corporate goal repre-senting the long-term proportion of earnings that the company intends to distribute to shareholders as dividends.






36. A ratio in property valua-tion; net operating income divided by sale price. Also known as the going-in rate.






37. The ratio of a set of observations' standard deviation to the observa-tions' mean value.






38. A swap in which the floating payments have a lower limit.






39. Transactions that are denominated in a currency other than a com-pany's functional currency.






40. To reduce the value of a future payment in allowance for how far away it is in time; to calcu-late the present value of some future amount. Also - the amount by which an instrument is priced below its face value.






41. The potential for asymmetric information to bring about a general decline in product quality in an industry.






42. The actual value of a variable minus its pre-dicted (or expected) value.






43. Items that affect comprehensive income but which bypass the income statement.






44. A wholly-owned sub-sidiary of a company that is established to provide financing of the sales of the parent company.






45. In the context of corporate finance - leverage refers to the use of fixed costs within a company's cost structure. Fixed costs that are operating costs (such as depreciation or rent) create operating leverage. Fixed costs that are financial costs (su






46. A standardized measure of systematic risk based upon an asset's covariance with the market portfolio.






47. The perceived ability of the bor-rower to pay what is owed on the borrowing in a timely manner; it represents the ability of a com-pany to withstand adverse impacts on its cash flows.






48. A method for accounting forthe effect of convertible securities on earnings pershare (EPS) that specifies what EPS would havebeen if the convertible securities had been con-verted at the beginning of the period - taking account of the effects of conv






49. Cannibalization occurs when an investment takes customers and sales away from another part of the company.






50. With the accounting systems - a formal record of increases and decreases in a specific asset - liability - component of owners' equity - rev-enue - or expense.