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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. A stage of growth in which the com-pany reaches an equilibrium in which investment opportunities on average just earn their opportu-nity cost of capital.






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






3. A calculation of yield that is annualized using the ratio of 365 to the number of days to maturity. Bond equivalent yield allows for the restatement and comparison of securities with different compounding periods.






4. The study of how data can besummarized effectively.






5. 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






6. The volatility that option traders use to price an option - implied by the price of the option and a particulau option-pricing model.






7. A dividend payout pol-icy under which earnings in excess of the funds necessary to finance the equity portion of com-pany's capital budget are paid out in dividends.






8. The combination of the underlying - puts - calls - and risk-free bonds that replicates a forward contract.






9. An annualized return that accounts for the effect of interest on interest; EAY is computed by compounding 1 plus the holding period yield forward to one year - then subtracting 1.






10. A record of the change in official reserves - which are the government's holdings offoreign currency.






11. A forecasting approach that involves moving from international and national macroeconomic forecasts to industry forecasts and then to individual company and asset forecasts.






12. With reference to regression - the set of variables included in the regression and the regression equation's functional form.






13. The most frequently occurring value in a set of observations.






14. 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






15. The probability of the joint occur-rence of stated even ts.






16. The ratio of cash dividends paid to earnings for a period.






17. A specifi-cation of how 'value' is to be understood in the context of a specific valuation.






18. 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.






19. Regression that models the straight-line relationship between the dependent and independen t variable (s) .






20. The ability to react and adapt to financial adversities and opportunities.






21. The risk of loss from failures in a company's systems and proce-dures (for example - due to computer failures or human failures) or events completely outside of the control of organizations (which would include 'acts of God' and terrorist actions) .






22. An option strategy involving the purchase of two puts and one call.






23. A merger or acquisition that is to be paid for with cash - securities - or some combina-tion of the two.






24. Financial instru-ments that an entity chooses to measure at fairvalue per lAS 39 or SFAS 159. Generally - the elec-tion to use the fair value option is irrevocable.






25. The difference between the fixed rate on an interest rate swap and the rate on a Trea-sury note with equivalent maturity; it reflects the general level of credit risk in the market.






26. The owners of a joint venture. Each is active in the management and shares control of the joint venture.






27. Long-term assets with physical sub-stance that are used in company operations - such as land (property) - plant - and equipment.






28. The risk that failures by company man-agers to effectively manage a company's environ-mental - social - and governance risk exposures will lead to lawsuits and other judicial remedies - resulting in potentially catastrophic losses for the company; th






29. The expected excess return on the market over the risk-free rate.






30. The cost of debt financing to a com-pany - such as when it issues a bond or takes out abank loan.






31. The use of computer networks to conduct financial transactions electronically.






32. FIrm The cash flow available to the company's suppliers of capital after all operat-ing expenses (including taxes) have been paid and necessary investments in working and fixed capital have been made.






33. An estimate of the equity risk pre-mium that is based upon estimates provided by a panel of finance experts.






34. The process of valuing long-lived assets at fair value - rather than at cost less accumulated depreciation. Any resulting profit or loss is either reported on the income statement and/or through equity under revaluation surplus.






35. A loan that is secured with com-panyassets.






36. An experiment that can produce one of two outcomes.






37. The money of other countries regardless of whether that money is in the form of notes - coins - or bank deposits.






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






39. A transaction in exchange-listed deriva-tive markets in which a party re-enters the market to close out a position.






40. Under U.S. GAAP - a measure used in estimating a defined-benefit pen-sion plan's liabilities - defined as 'the actuarial present value of benefits (whether vested or non-vested) attributed by the pension benefit formula to employee service rendered b






41. The value per share of a no-growth company - equal to the expected level amount of earnings divided by the stock's req uired rate of return.






42. The difference between reported earnings per share and expected earnings per share.






43. The market for short-term debt instruments (one-year maturity or less).






44. Deliberate activity aimed at influencing reporting earnings numbers - often with the goal of placing management in a favorable light; the opportunistic use of accruals to manage earnings.






45. Businesses with high sensitivity to business- or industry-cycle influences.






46. Not symmetrical.






47. A prof -itabili ty ratio calculated as operating income (i.e. - income before inte est and taxes) divided by revenue.






48. Reward-to-volatility ratio; ratio of portfolio excess return to standard deviation.

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49. Dummy variables used as dependent variables rather than as inde-pendent variables.






50. 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