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Test your basic knowledge |
CFA Level2 Vocab
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Study First
Subjects
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
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 theory of economic growth based on the view that the growth of real GDP per person is temporary and that when it rises above subsistence level - a population explo-sion eventually brings it back to subsistence level.
Acquiring company - or acquirer
Classical growth theory
Exit price
Definition of value (or standard of value)
2. Each component call option in a cap.
Price to cash flow
Going-concern assumption
Caplet
Degree of total leverage
3. Agreements between the company as borrower and its creditors.
U.S. GAAP and uniting of interests under IFRS
Active risk squared
Normalized
Debt covenants
4. A trade in two closely related stocks involving the short sale of one and the pur-chase of the other.
Designated fair value instruments
Pairs arbitrage trade
Salvage value
Strap
5. A variable used to explain the dependen t variable in a regression ; a right-hand-side variable in a regression equation .
Independent variable
American option
Arbitrage portfolio
Short
6. With reference to regression - the set of variables included in the regression and the regression equation's functional form.
Normal distribution
Capture hypothesis
Earnings management activity
Model specification
7. A two-dimensional plot of pairs of obser-vations on two data series.
Tender offer
Option price - option premium - or premium
Scatter plot
Price to book value
8. Next twelve months P/E: current market price divided by an estimated next twelve months EPS.
NTM P/E
Historical equity risk premium approach
Accounting estimates
Present value model or discounted cash flow model
9. The pursuit of wealth by capturing economic rent---consumer surplus - producer sur-plus - or economic profit.
Sampling distribution
Net liability balance sheet exposure
Rent seeking
Amortizing and accreting swaps
10. Securities held by banks or other financial intermediaries for trading purposes.
Commodity option
Scaled earnings surprise
Dealing securities
Ex-dividend
11. Factors related to the company's internal performance - such as factors relating to earnings growth - earnings variability - earnings momentum - and financial leverage.
NPV rule
Agency costs of equity
Centralization permits economies of scale and allows a company to use some of its risks to offset other risks.
Company fundamental factors
12. A balance sheet organized so as to group together the various assets and liabilities into subcategories (e.g. - current and noncurrent) .
Classified balance sheet
Statutory merger
Disbursement float
Alpha (or abnormal return)
13. A range that has a given proba-bility that it will contain the population parameter it is intended to estimate.
Defined benefit obligation
Discount interest
Confidence interval
Sell-side analysts
14. An entity associated with a futures market that act~ as middleman between the con-tracting parties and guarantees to each party the performance of the other.
Translation exposure
Deductible temporary differences
Survivorship bias
Clearinghouse
15. 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.
Grouping by function
Future value (FV)
Orderly liquidation value
Capitalized cash flow model (method)
16. The risk of a change in value of a n asset or liability denomi-nated in a foreign currency due to a change in exchange rates.
Exposure to foreign exchange risk
Sales risk
Quintiles
Generalized least squares
17. The argument that it is necessary to protect a new industry to enable it to grow into a mature industry that can compete in world markets.
Nominal scale
Carried interest
Infant-industry argument
Service period
18. Serial correlation in which a positive error for one observation increases the chance of a positive error for another observation - and a negative error for one observation increases the chance of a negative error for another observation.
Positive serial correlation
Delta-normal method
Trade-weighted index
Organic growth
19. Momentum indicators based on price.
Synthetic call
Financial reporting quality
Technical indicators
Marketability discount
20. 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.
Conversion factor
Interest coverage
Lack of marketability discount
Differentiation
21. The day that options are granted to employees; usually the date that compensation expense is measured if both the number of shares and option price are known.
Cash
Compounding
Grant date
Identifiable intangible
22. A tool that calculates the contri-bution to real CDP growth of each of its sources.
Strip
Growth accounting
Economic growth
Volatility
23. The rate at which an option's time value decays.
Theta
Legislative and regulatory risk
Locked limit
Balance-sheet-based accruals ratio
24. Aka also enterprise risk management.
Linear interpolation
Centralization permits economies of scale and allows a company to use some of its risks to offset other risks.
Population variance
Quality of earnings analysis
25. The status of a company in the sense of whether it is assumed to be a going con-cern or not.
Financial leverage ratio
Measure of location
Agency problem - or principal-agent problem
Premise of value
26. The relationship of the quantity of an asset being hedged to the quantity of the deriva-tive used for hedging.
Hedge ratio
Risk budgeting
Sample selection bias
Standard normal distribution (or unit normal distribu-tion)
27. An acquisition in which the acquirer purchases the target company's assets and pay-ment is made directly to the target company.
Asset purchase
Strategic transaction
Out-of-sample forecast errors
Liquidity premium
28. 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.'
Price discovery
Monte
Vested benefit obligation
External growth
29. Unexpected earnings divided by the standard deviation of analysts' earnings forecasts.
Butterfly spread
Dividend discount model based approach
Error term
Scaled earnings surprise
30. A pre-offer takeover defense mecha-nism that gives target company bondholders the right to sell their bonds back to the target at a pre-specified redemption price - typically at or above par value; this defense increases the need for cash and raises
Relative dispersion
Prior transaction method
Linear interpolation
Poison puts
31. Any outcome or specified set of outcomes of a random variable.
Event
Sales-type lease
Multiplication rule for probabilities
Cost of debt
32. Investigation and analysis in support of a recommendation; the failure to exercise due diligence may sometimes result in liability accord-ing to various securities laws.
Market-oriented investors
Transaction exposure
Cash flow additivity principle
Due diligence
33. An inventory accounting method in which the sales value of an item is reduced by the gross margin to calculate the item's cost.
Cost of capital
Retail method
Swap spread
Interval scale
34. An Activity ratio calculated as total revenue divided by average net fixed assets.
Sampling error
Operating leverage
Control premium
Fixed asset turnover
35. A legal corporate entity whose shareholders are its members. The members of the exchange have the privilege of executing transactions directly on the exchange.
Percentage-of-completion
Cannibalization
Futures exchange
Buy-side analysts
36. 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.
Cost-of-service regulation
Fundamental factor models
Percentage-of-completion
Service period
37. The average squared deviation below a target value.
Harmonic mean
Conglomerate merger
Versioning
Target semivariance
38. Probabilities that generally do not vary from person to person; includes a pri-ori and objective probabilities.
Return on invested capital (ROIC)
Acquisition method
Strategic transaction
Objective probabilities
39. A type of non-audited financial statements; typically provide an opinion letter with representations and assurances by the reviewing accountant that are less than those in audited financial statements.
First-differencing
Reviewed fmancial statements
Partnership
Comparative advantage
40. The probability-weighted average of the possible outcomes ofa random variable.
Expected value
Liquidation
Income tax payable
Dummy variable
41. The required rate of return on com-mon stock.
Equity
Cost of equity
Forward dividend yield
Foreign currency
42. The process of using an option to buy or sell the underlying.
Sharpe ratio
Exercise or exercising the option
Target payout ratio
Relative frequency
43. Division ofnet operating income by an overall capitalization rate to arrive at market value.
Credit scoring model
Ordinal scale
Direct income capitalization approach
Segment debt ratio
44. A trader holding a position open some-what longer than a scalper but closing all posi-tions at the end of the day.
Cash
Defined benefit obligation
Credit scoring model
Day trader
45. A series of call options on an interest rate - with each option expiring at the date on which the floating loan rate will be reset - and with each option having the same exercise rate. A cap in general can have an underlying other than an interest ra
Interest rate cap or cap
Cash equivalents
Normalized earnings
Bond option
46. An approach to investment analysis and security selection.
Time value or speculative value
Investment strategy
Maintenance margin requirement
Bayes' formula
47. An industry's underlying eco-nomic and technical characteristics.
Industry structure
Intangible assets
Parameter
Partnership
48. The process of obtaining a sample.
Sampling
Matching strategy
Liquidity
Balance-sheet-based accruals ratio
49. 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.
Basis point value (BPV)
Underlying earnings (or persistent earnings - continu-ing earnings - or core earnings)
Grant date
Power of a test
50. Valuation approach that values an asset based on pricing multiples from sales of assets viewed as similar to the subject asset.
Normalized earnings
Market approach
Yield beta
Greenmail