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Test your basic knowledge |
CFA Level2 Vocab
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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. The risk that environmental - social - or governance risk fac tors will result in significant costs or other losses to a company and its share-holders; the risk arising from a company's obliga-tion to meet required payments under its financ-ing agree
Commercial paper
Financial risk
Consolidation
Vertical merger
2. The rate at which an option's time value decays.
Income tax paid
Overnight index swap (OIS)
Theta
Liquidity risk
3. An intangible that can beacquired singly and is typically linked to specificrights or privileges having finite benefit periods(e.g. - a patent or trademark).
Conglomerate discount
Identifiable intangible
Leptokurtic
Covered call
4. A theory of regulatory behavior that holds that regulators must take account of the demands of three groups: legislators - who established and oversee the regulatory agency; firms in the regulated industry; and consumers of the regulated indus-try's
Population mean
Value
Conglomerate merger
Share-the-gains - share-the-pains theory
5. A method of account-ing for joint ventures where the venturer's share of the assets - liabilities - income and expenses of the joint venture are combined on a line-by-line basis with similar items on the venturer's financial statements.
Cherry-picking
Proportionate consolidation
Imputation
Impairment
6. 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.
Foreign exchange market
Deep in the money
Grouping by function
Implied volatility
7. A quantity - calculated based on a sam-ple - whose value is the basis for deciding whether or not to reject the null hypothesis.
Unconditional probability (or marginal probability)
Test statistic
Leveraged floating-rate note or leveraged floater
Bond-equivalent yield
8. Aka also enterprise risk management.
Direct debit program
Held-for-trading securities (trading securities)
Asset-based approach
Centralization permits economies of scale and allows a company to use some of its risks to offset other risks.
9. The autocorrelation of the error term.
London Interbank Offer Rate (LIBOR)
Error autocorrelation
Pure-play method
Multivariate distribution
10. A dollar deposited outside the United States.
Orderly liquidation value
Eurodollar
Due diligence
Exhaustive
11. The cost associated with holding someasset - including financing - storage - and insurancecosts. Any yield received on the asset is treated as anegative carrying cost.
Closeout netting
Cost of carry
Direct income capitalization approach
Percentiles
12. An activity ratio calculated as purchases divided by average trade payables.
Alternative hypothesis
Active portfolio
Payables turnover
Receivables turnover
13. A rate of return that reflects the rela-tionship between differently dated cash flows; a discount rate.
Interest rate
Present value model or discounted cash flow model
Uniting of interests method
Capture hypothesis
14. An inter-national agreement signed in 1947 to reduce tar-iffs on international trade.
Voluntary export restraint
Working capital management
General Agreement on Tariffs and Trade
Option price - option premium - or premium
15. The accounting system of recording transactions in which every recorded transaction affects at least two accounts so as to keep the basic accounting equation (assets = liabilities + owners' equity) in balance.
Control premium
Double-entry accounting
Hypothesis testing
Maintenance margin requirement
16. An option strategy involving the hold-ing of an asset and sale of a call on the asset.
Covered call
Yield to maturity
Valuation
Regime
17. A graphical representa-tion of the expected return and risk of all portfo-lios that can be formed using two assets.
Interest rate call
Portfolio possibilities curve
Capital account
American
18. The value of the U.S. dollar expressed in units of foreign currency per U.S. dollar.
Partial regression coefficients or partial slope coeffi-cients
Conditional probability
Nominal exchange rate
Random variable
19. The relationship between option price and volatility.
Flexible exchange rate
Fixed-income forward
Free cash flow method
Vega
20. A regression that expresses the dependen t and independent vari-ables as natural logarithms.
Asset beta
Enterprise value multiple
American
Log-log regression model
21. 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.
Drag on li
Residual autocorrelations
Fixed-rate perpetual preferred stock
NPV rule
22. Plan in which the company promises to pay a certain annual amount (defined benefit) to the employee after retirement. The company bears the investment risk of the plan assets .
Debt covenants
Vertical merger
Tree diagram
Defined-benefit pension plans
23. The risk associated with operating earnings. Operating earnings are uncertain because total revenues and many of the expendi-tures contributed to produce those revenues are uncertain.
Asset purchase
Marketability discount
Business risk
Ordinary shares (common stock or common shares)
24. Options that are far out-of-the-money.
Deep out of the money
Trend
Going-concern assumption
Write-down
25. A method of account-ing in which combined companies were portrayed as if they had always operated as a single eco-nomic entity. Called pooling of interests under
Uniting of interests method
Zero-cost collar
Free cash flow hypothesis
Histogram
26. The practice of determining a model by extensive searching through a dataset for statisti-cally significant patterns.
Normal backwardation
Corporate raider
Sample kurtosis
Data mining
27. The condition in futures markets in which futures prices are higher than expected spot prices.
Net revenue
Settlement date or payment date
Cost of preferred stock
Normal contango
28. The correlation of a time series with its own past values.
Macroeconomic factor
Settlement period
Option price - option premium - or premium
Autocorrelation
29. A trader who offers to buy or sell futures contracts - holding the position for only a brief period of time. Scalpers attempt to profit by buy-ing at the bid price and selling at the higher ask price.
Scalper
Guideline public companies
Ordinary annuity
Discount
30. The purchase of some portion of one company by another; the purchase may be for assets - a definable segment of another entity - orthe purchase of an entire company.
Acquisition
Standard deviation
Floorlet
Currency forward
31. As an approach to valuing a company - the sum of the value of the company - assuming no use of debt - and the net present value of any effects of debt on company value.
Equitizing cash
Adjusted present value (APV)
In-process research and development
Orderly liquidation value
32. The characteristic of minimum-variance frontiers that they are sensitive to small changes in inputs.
Dutch Book theorem
Total probability rule for expected value
At the money
Instability in the minimum-variance frontier
33. When a company has a single risk management group that monitors and controls all of the risk-taking activities of the organization.
Pyramiding
Segment ROA
Centralized risk management or companywide risk management
Rule of 72
34. With reference to cash flow statements - a format for the presenta-tion of the statement which - in the operating cash flow section - begins with net income then shows additions and subtractions to arrive at operatingcash flow.
Indirect format (indirect method)
Justified price multiple (or warranted price multiple or intrinsic price multiple)
Imports
Forward dividend yield
35. The time remaining in the life of a derivative - typically expressed in years.
Brokerage
Financial distress
Time to expiration
Covered call
36. The average exchange rate - with individual currencies weighted by their importance in U.S. international trade.
Number of days of payables
Dividend discount model (DDM)
Trade-weighted index
Cointegrated
37. A combination of interest rate put options designed to hedge a lender against lower rates on a floating-rate loan.
Dispersion
Floor
Capital market line (CML)
Managerialism theories
38. A measure of the expected annual cash flow from the operation of a real estate investment after all expenses but before taxes.
Grouping by function
Liabilities
Backtesting
Before-tax cash flow
39. An obligation that is expected to be settled - with the outflow of resources embody-ing economic benefits - over a future period gen-erally greater than one year.
Long-term liability
Book value of equity (or book value)
Quick ratio - or acid test ratio
Commodity forward
40. With reference to investment selection processes - an approach that starts with macro selection (i.e. - identifying attractive geo-graphic segments andVor industry segments) and then addresses selection 0 the most attractive investments within those
Abnormal earnings
Top-down analysis
Out-of-the-money
Net realizable value
41. A loss in value caused bychanges in price levels. Monetary assets experi-ence purchasing power losses during periods ofinflation.
Tariff
Modified duration
Active factor risk
Purchasing power loss
42. A measure of VAR equivalentto the analytical method bu t that refers to the use of delta to estimate the option's price sensitivity.
Delta-normal method
Out-of-sample test
Capital allocation line (CAL)
Alpha (or abnormal return)
43. The expected excess return on the market over the risk-free rate.
Nonconventional cash flow
Deferred tax liabilities
Market risk premium
Sales-type lease
44. Valuation indi-cators that compare a stock's performance during a period either to its own past performance or to the performance of some group of stocks.
Income statement (statement of operations or profit and loss statement)
North
Target semivariance
Relative strength (RSTR) indicators
45. Costs that fluctuate with the level of production and sales.
Variable costs
Correlation analysis
Shark repellents
Antidilutive
46. Uncorrelated; at a right angle.
Orthogonal
Monitoring costs
Risk-neutral probabilities
London Interbank Offer Rate (LIBOR)
47. An extra return to investors to compensate for lack of a public mar-ket or lack of marketability.
Lack of marketability discount
Statistic
Frequency polygon
Fixed exchange rate
48. Managers who hold portfolios that differ from their benchmark port-folio in an attempt to produce positive risk-adjusted returns.
Strap
Active investment managers
Market price of risk
Proportionate consolidation
49. The hypothesis that higher debt levels discipline managers by forcing them to make fixed debt service payments and by reducing the company's free cash flow.
Free cash flow hypothesis
Net present value (NPV)
Interest rate cap or cap
Heteroskedasticity-consistent standard errors
50. 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.
Grant date
Price multiple
Perpetuity
Clientele effect