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






2. A feature of futures markets in which futures prices provide valuable information about the price of the underlying asset.






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






4. A profitability ratio calcu-lated as net income divided by average total assets; indicates a company's net profit generated per dollar invested in total assets.






5. The graphical representation of a model of asset price dynamics in which - at each period - the asset moves up wi t probability p or down with probability (I - p).






6. The return on a portfolio minus the return on the portfolio's benchmark.






7. The average rate of return in excess of the risk-free rate.






8. Bias introduced by systemati-cally exclua ing some members of the population according to a particular attribute-for example - the bias introduced when data availability leads to certain observations being excluded from the analysis.






9. A number between - 1 and + 1 that measures the co-movement (linear association) between two random variables.






10. 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.






11. The slope of the capital market line - indicating the market risk premium for each unit of market risk.






12. A series of put 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 floor in general can have an underlying other than the interest






13. A hypothesis concern-ing pricing behavior that holds that even though there are only a few firms in an industry - they are forced to price their products more or less com-petitively because of the ease of entry by outsiders. The key aspect of a conte






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






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






16. 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






17. The quality of being relatively unaffected by a violation of assumptions.






18. The portfolio with the each given level of minimum variance for expected return.






19. The assumption of equal priorprobabilities.






20. A company's profits on its usual business activities before deducting taxes.






21. The estimated fair value of the price multiple - usually based on fore-casted fundamentals or comparables.






22. Approach that values a private company based on the values of the underlying assets of the entity less the value of any related liabilities.






23. A minimum level of cash to be held available-estimated in advance and adjusted for known funds transfers - seasonality - or other factors.






24. The absorption of one company by another; two companies become one entity and one or both of the pre-merger companies ceases to exist as a separate entity.






25. The sale by a foreign firm of exports at a lower price than the cost of production.






26. 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






27. Observations over individual units at a point in time - as opposed to time-series data.






28. 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.






29. With reference to statistical infer-ence - the subdivision dealing with the testing ofhypotheses about one or more populations.






30. Observations that are depen-dent on each other.






31. The relative price of foreign-made goods and services to U.S. -made goods and services.






32. 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.






33. The currency of the country where a company is located.






34. A company that has similar business risk; usually in the same industry and preferably with a single line of business.






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






36. The property of having a constantvariance; refers to an error term that is constantacross observations.






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






38. A model of stock valuation that views intrinsic value of stock as the sum of book value per share plus the present value of the stock's expected future residual income per share.






39. The condition in futures markets in which futures prices are higher than expected spot prices.






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






41. Instruments that payinterest as the difference between the amountborrowed and the amount paid back.






42. Accounting method in which the only relevant transactions for the financial statements are those that involve cash.






43. The differ-ence between net operating assets at the end and the beginning of the period.






44. The currency of the primary economic environment in which an entity operates.






45. A result in probability theory stating that inconsistent probabilities create profit opportunities.






46. The restatement of financial statement items using a common denominator or reference item that allows one to identify trends and major differences; an example is an income statement in which all items are expressed as a percent of revenue.






47. A finite set of level sequential cash flows.






48. The sum of the observations divided by the number of observations.






49. A loan in which the borrower receives a sum of money at the start and pays back the entire amount with interest in a single pay-ment at maturity.






50. Observations of a variable over time.