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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. A regression assumption violation that occurs when two or more independent vari-ables (or combinations of independent variables) are highly but not perfectly correlated with each other.
Multicollinearity
Alpha (or abnormal return)
Units-of-production method
Liabilities
2. An international organi-zation that places greater obligations on its mem-ber countries to observe the GATT rules.
Operating risk
Nontariff barrier
Financial reporting quality
World Trade Organization
3. A probability distribution that specifies the probabilities for a group of related random variables.
Discount for lack of control
Multivariate distribution
Modified duration
Cherry-picking
4. Time thought of as advancing in dis-tinct finite increments.
Impairment
Type II error
Long-term debt-ta-assets ratio
Discrete time
5. American Free Trade Agreement An agree-ment - which became effective on January 1 - 1994 - to eliminate all barriers to international trade between the United States - Canada - and Mexico after a 15-year phasing-in period.
Passive portfolio
Enterprise value multiple
Forward P/E (also leading P/E or prospective P/E)
North
6. Regulation that allowsprices to reflect only the actual average cost ofproduction and no monopoly profits.
Cost-of-service regulation
Income tax payable
Completed contract
Efficient frontier
7. Ratios that measure a company's ability to generate profitable sales from its resources (assets).
Enterprise value (EV)
White-corrected standard errors
Available-for-sale investments
Profitability ratios
8. An approach to valuing natu-ral resource companies that estimates company value on the basis of the market value of the natu-ral resources the company controls.
Commercial paper
Working capital turnover
Asset-based valuation
Expectational arbitrage
9. Activities which are associated with the acquisition and disposal of property - plant - and equipment; intangible assets; other long-term assets; and both long-term and short-term investments in the equity and debt (bonds and loans) issued by other c
Manufacturing resource planning (MRP)
Merger
Investing activities
Tenor
10. An option strategy involving the hold-ing of an asset and sale of a call on the asset.
Capitalization rate
Covered call
Cost of carry model
Comparables (comps - guideline assets - guideline com-panies)
11. In reference to corporate taxes - a system that imputes - or attributes - taxes at only one level of taxation. For countries using an imputation tax system - taxes on dividends are effectively levied only at the shareholder rate. Taxes are paid at th
Imputation
Overnight index swap (OIS)
Solvency ratios
Currency swap
12. Controlling additional property throughreinvestment - refinancing - and exchanging.
Pyramiding
U.S. official reserves
Revenue
Accumulated depreciation
13. The rate at which periodic interest payments are calculated.
Stated rate (nominal rate or coupon rate)
Partial regression coefficients or partial slope coeffi-cients
Trade-weighted index
Orthogonal
14. The relationship between the option price and the underlying price - which reflects the sensi-tivity of the price of the option to changes in the price of the underlying.
Income tax paid
Active specific risk or asset selection risk
Delta
Relative frequency
15. Factors related to the company's internal performance - such as factors relating to earnings growth - earnings variability - earnings momentum - and financial leverage.
Company fundamental factors
Compounding
Capital rationing
Amortizing and accreting swaps
16. A tabular display of data summarized into a relatively small number of intervals.
Frequency distribution
Unclassified balance sheet
Realizable value (settlement value)
Pooling of interests accounting method
17. As used in this book - the use of a spreadsheet in executing a dividend discount model valuation - or other present value model valuation.
Mature growth rate
Spreadsheet modeling
Reviewed fmancial statements
Level of significance
18. In using the method of com parables - the value of a price mul-tiple for the comparison asset; when we have com-parison assets (a group) - the mean or median value of the multiple for the group of assets.
Account format
Benchmark value of the multiple
Mutually exclusive projects
Purchased in-process research and development costs
19. Aka Harmonic mean.
Performance guarantee
Weighted harmonic mean
Foreign currency
Dummy variable
20. An offset to property - plant - and equipment (PPE) reflecting the amount of the cost of PPE that has been allocated to current and previous accounting periods.
Agency costs of equity
Bond-equivalent basis
Accumulated depreciation
Sample mean
21. 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.
Sum-of-the-parts valuation
Degree of financial leverage (DFL)
NPV rule
Infant-industry argument
22. CMT swap A swap in which the floating rate is the rate on a security known as a constant maturity treasury or CMT security.
Bond equivalent yield
Constant maturity swap or
Project sequencing
Operating profit (operating income)
23. A merger involving the pur-chase of a target that is farther along the value or production chain; for example - to acquire a distributor.
Forward integration
Neoclassical growth theory
Period costs
Indexing
24. Each value on a binomial tree from which suc-cessive moves or outcomes branch.
Financial distress
Node
Payment date
In-process research and development
25. A varia-tion ofVAR that reflects credit risk.
Earnings per share
Debit
Backward integration
Credit VAR - default VAR - or credit at risk
26. A loan in which the interest rate is reset at least once after the starting date.
Leveraged floating-rate note or leveraged floater
Floating-rate loan
Butterfly spread
Acquisition method
27. A purchase involving a buyer having essentially no material synergies with the target (e.g. - the purchase of a private company by a company in an unrelated industry or by a private equity firm would typically be a financial transaction) .
Shark repellents
Quartiles
Financial transaction
Cheapest to deliver
28. The variable whose variationabout its mean is to be explained by the regres-sion; the left-hand-side variable in a regressionequation.
Weighted-average cost of capital (WACC)
Lemons problem
Active portfolio
Dependent variable
29. A third party that is sough t out bX the tar-get c0mpany's board to Burchase a substantial minority stake in the target-enough to block a hostile takeover without selling the entire company.
Debt-to-assets ratio
White sqnire
Dilution
Historical cost
30. A method of accounting in which combined companies were portrayed as if they had always operated as a single economic entity. Called pooling of interests under U.S. GAAP and uniting of interests under IFRS. (No longer allowed under U.S. GAAP or IFRS.
Dutch Book theorem
Pooling of interests accounting method
Cost of equity
Foreign currency transactions
31. With reference to a random vari-able - the property of having characteristics such as mean and variance that are not constant through time.
Method based on forecasted fundamentals
Nonstationarity
Binomial random variable
Economic growth rate
32. Real CDP divided by the population.
Real GDP per person
Value investors
Guideline transactions method
Cross-product netting
33. A floating-rate note or bond in which the coupon is adjusted at a multiple of a benchmark interest rate.
Leveraged floating-rate note or leveraged floater
Intrinsic value or exercise value
Projected benefit obligation
Working capital
34. When parties agree to exchange only the net amount owed from one party to the other.
Netting
Short
Cash conversion cycle (net operating cycle)
Break point
35. The sum of all values in a distribution or dataset - divided by the number of values summed; a synonym of arithmetic mean.
Settlement period
Financial transaction
Mean
omparable company
36. The number of units produced and sold at which the company's net income is zero (revenues = total costs).
Dutch Book theorem
Factor sensitivity (also factor betas or factor loadings)
Entry price
Breakeven point
37. A probability based on logical analysis rather than on observation or personal judgment.
Debt rating approach
Mixed offering
A priori probability
Working capital
38. A feature of futures markets in which futures prices provide valuable information about the price of the underlying asset.
Realizable value (settlement value)
Normalized earnings
Pure discount instruments
Price discovery
39. The probability-weighted average of the possible outcomes ofa random variable.
Currency option
Securities Act of 1933
Traditional efficient markets formulation
Expected value
40. A forward contract calling for one party to make a fixed interest payment and the other to make an interest pay-ment at a rate to be determined at the contract expiration.
Forward rate agreement (FRA)
Statement of changes in shareholders' equity (state-ment of owners' equity)
Diffuse prior
Company share-related factors
41. An option strategy that combines a bull spread and a bear spread having two differentexercise prices - which produces a risk-free payoffof the difference in the exercise prices.
Maintenance margin requirement
Box spread
Statement of changes in shareholders' equity (state-ment of owners' equity)
Current exchange rate
42. CMT A hypothetical U.S. Treasury note with a constant maturity. A CMT exists for various years in the range of 2 to
Return on total capital
Equity method
Constant maturity treasury or
Conventional cash flow
43. Describes two time series that have a long-term financial or economic relationship such that they do not diverge from each other without bound in the long run.
Tax expense
Cointegrated
Fundamental factor models
Acquiring company - or acquirer
44. An exchange rate pegged at a value decided by the government or central bank and that blocks the unregulated forces of demand and supply by direct intervention in the foreign exchange market.
Correlation
Target semivariance
Fixed exchange rate
Bootstrapping earnings
45. Assets that are expected to bene-fit the company over an extended period of time (usually more than one year).
Target semideviation
Noncurrent assets
Residual income (or economic profit or abnormal earnings)
Exit price
46. An option strategy involving the purchase of two calls and one put.
Dependent variable
Binomial tree
Strap
Monetary/nonmonetary method
47. The condition in which supply equals demand.
Futures contract
Minimum-variance frontier
Equilibrium
Discount interest
48. An estimate of the country spread (country equity premium) for a develop-ing nation that is based on a comparison of bonds yields in country being analyzed and a developed country. The sovereign yield spread is the differ-ence between a government bo
Defined-benefit pension plans
Sovereign yield spread
Unearned revenue (deferred revenue)
Accrued interest
49. A guarantee from the clear-inghouse that if one party makes money on a transaction - the clearinghouse ensures it will be paid.
Technical indicators
Return on common equity (ROCE)
Guideline public companies
Performance guarantee
50. The correlation of a time series with its own past values.
Current account
If-converted method
Underlying
Autocorrelation