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Test your basic knowledge |
CFA Level2 Vocab
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
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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 annual return that an investor earns on a bond if the investor purchases the bond today and holds it until maturity.
Yield to maturity
Semivariance
Net operating profit less adjusted taxes - or NOPLAT
Hedging
2. A rule that states that the number of years it takes for the level of a variable to double is approximately 70 divided by the annual percent-age growth rate of the variable.
Forward rate agreement (FRA)
Mixed factor models
Rule of 70
Paired comparisons test
3. The probability that an asset's value moves up.
Box spread
Income statement (statement of operations or profit and loss statement)
Up transition probability
Dealing securities
4. 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
Sample mean
Venturers
Theory of contestable markets
Interval scale
5. The probability of an event estimated as a relative frequency of occurrence.
Empirical probability
Official settlements account
Earnings management activity
Forward dividend yield
6. A business's value under a going-concern assumption.
Deferred tax liabilities
Going-concern value
Statistically significant
Terminal value of the stock (or continuing value of the stock)
7. A form of active strategy which entails scheduling maturities on a systematic basis within the investment portfolio such that invest-ments are spread out equally over the term of the ladder.
Dividend discount model (DDM)
Implied repo rate
Installment method (installment-sales method)
Laddering strategy
8. Assets and liabilities with value equal to the amount of currency con-tracted for - a fixed amount of currency. Examples are cash - accounts receivable - mortgages receiv-able - accounts payable - bonds payable - and mort-gages payable. Inventory is
Monetary assets and liabilities
Other comprehensive income
Pure factor portfolio
Pseudo-random numbers
9. The probability of a Type I error in testing a hypothesis.
Convenience yield
Corporate governance
Dummy variable
Level of significance
10. An approach for estimating a country's equity risk premium. The market rate of return is estimated as the sum of the dividend yield and the growth rate in dividends for a market index. Subtracting the risk-free rate of return from the estimated marke
Bernoulli trial
Dividend discount model based approach
Classified balance sheet
Shareholders' equity
11. The day that the corporation issues a statement d eclaring a specific dividend.
Stated annual interest rate or quoted interest rate
Declaration date
Market risk
Variance
12. Any departure of the market price of an asset from the asset's estimated intrinsic value.
In-process research and development
Surprise
Solvency ratios
Mispricing
13. An option on the yield spread on a bond.
Lessee
Direct debit program
Credit spread option
Caplet
14. 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
Residual autocorrelations
Basic earnings per share (EPS)
Diff swaps
Covered interest arbitrage
15. A poison pill provision that allows for the redemption or cancellation of a poi-son pill provision only by a vote of coNtinuing directors (generally directors who were on the tar-get company's board p rior to the takeover attempt) .
Strategic transaction
Exchange ratio
Index amortizing swap
Dead-hand provision
16. Amounts that a business owes to its vendors for goods and services that were pur-chased from them but which have not yet been paid.
Cash
Accounts payable
Nominal scale
Initial margin requirement
17. An investment strategy in which an investor constructs a portfolio to mirror the per-formance of a specified index.
Transaction exposure
Indexing
Expenses
Long-term contract
18. A subset of a population.
Sample
Discrete time
Present value (PV)
Credit analysis
19. A type of finance lease - from a lessor perspective - where the present value of the lease payments (lease receivable) exceeds the carrying value of the leased asset. The revenues earned by the lessor are operating (the profit on the sale) and financ
Sales-type lease
Common size statements
Transaction exposure
Debt with warrants
20. A regression that expresses the dependen t and independent vari-ables as natural logarithms.
Log-log regression model
Accrued expenses (accrued liabilities)
Sell-side analysts
Compiled f'mancial statements
21. A wholly-owned sub-sidiary of a company that is established to provide financing of the sales of the parent company.
Going-concern assumption
Risk governance
Exercise price (strike price - striking price - or strike)
Captive rmance subsidiary
22. A balance sheet asset that arises when an excess amount is paid for income taxes relative to accounting profit. The taxable income is higher than accounting profit and income tax payable exceeds tax expense. The company expects to recove r the differ
Deferred tax assets
Legal risk
Earnings expectation management
Mispricing
23. A country that during its entire his-tory has borrowed more in the rest of the world than other countries have lent in it.
Debtor nation
Buy-side analysts
Heteroskedastic
Complement
24. 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.
Floor
Fixed exchange rate
Flotation cost
Corporate raider
25. Aka Harmonic mean.
Bond-equivalent basis
Weighted harmonic mean
Gains
Credit
26. Small numbers of observations at either extreme (small or large) ofa sample.
Sector neutralizing
Crawling peg
Business risk
Outliers
27. An intangible that cannot be acquired singly and that typically possesses an indefinite benefit period; an example is account-ing goodwill.
Vested benefit obligation
Standard cost
Exit price
Unidentifiable intangible
28. The remaining (undepreciated) bal-ance of an asset's purchase cost. For liabilities - the face value of a bond minus any unamortized dis-count - or plus any unamortized premium.
Cash
Purchasing power loss
Net book value
American option
29. Historical beta adjusted to reflect the tendency of beta to be mean reverting.
Financial leverage ratio
Adjusted beta
Synthetic index fund
Orderly liquidation value
30. Futures contracts in which the underlying is a stock - bond - or currency.
Financial futures
Margin
Roy's safety first criterion
Gross profit argin
31. The condition of being of sufficient importance so that omission or misstatement of the item in a financial report could make a differ-ence to users' decisions.
Logit model
Nontariff barrier
Materiality
Vertical merger
32. An option that allows the holder to buy (if a call) or sell (if a put) an underlying cur-rency at a fixed exercise rate - expressed as an exchange rate.
Straight-line method
Currency option
Structured note
First-order serial correlation
33. A number between - 1 and + 1 that measures the co-movement (linear association) between two random variables.
Company fundamental factors
Government sector surplus or deficit
Noncurrent assets
Correlation
34. The owner of an asset that grants the right to use the asset to another party.
Time to expiration
Systematic sampling
Lessor
Income statement (statement of operations or profit and loss statement)
35. The property of having a constantvariance; refers to an error term that is constantacross observations.
Operating lease
Homoskedasticity
Exports
Catalyst
36. Revenue that has been earned but not yet billed to customers as of the end of an accounting period.
Guideline transactions method
Point of sale
Unbilled revenue (accrued revenue)
Guideline public company method
37. Huidity When receipts lag - creating pres-sure fmm the decreased available funds.
Business risk
Current assets - or liquid assets
Drag on li
Nonconventional cash flow
38. The percentage of total earnings paid out in dividends in any given year (in per-share terms - DPS/ EPS).
Segment ROA
Implied yield
Cost of carry
Payout ratio
39. Costs (e.g. - executives' salaries) that cannot be directly matched with the timing of rev-enues and which are thus expensed immediately.
Period costs
Quick assets
Price to cash flow
Independent
40. A tabular display of data summarized into a relatively small number of intervals.
Margin
Decision rule
Frequency distribution
Statement of retained earnings
41. A record of the change in official reserves - which are the government's holdings offoreign currency.
Bernoulli trial
Diluted earnings per share (diluted
Official settlements account
Definition of value (or standard of value)
42. Momentum indicators based on price.
Long-lived assets (or long-term assets)
Technical indicators
Degree of operating leverage (DOL)
Sampling plan
43. A theory of regulatory behavior that predicts that regulators will eventually be cap-tured by special interests of the industry being regulated.
Time value of money
Ex-dividend date
Capture hypothesis
Floor traders or locals
44. Each component put option in a floor.
Floorlet
Equity options
Imputation
Fixed exchange rate
45. 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.
Multiple linear regression
Proportionate consolidation
Economies of scale
Transaction exposure
46. A mean computed after assigning a stated percent of the lowest values equal to one specified low value - and a stated percent of the highest values equal to one specified high value.
Time-weighted rate of return
Current assets - or liquid assets
Winsorized mean
Estimate
47. A depreciation method that allocates evenly the cost of a long-lived asset less its estimated residual value over the estimated useful life of the asset.
Straight-line method
Settlement price
Risk-neutral valuation
Indexing
48. An option strategy in which a position in an asset is converted to a risk-free position with a position in a specific number of options. The number of options per unit of the underlying changes through time - and the position must be revised to maint
Statement of cash flows (cash flow statement)
Delta hedge
Active specific risk or asset selection risk
Floored swap
49. Internal or external limita-tions on investments.
Other post-employment benefits
Investment constraints
Daily settlement
Solvency ratios
50. Resources controlled by an enterprise as a result of past events and from which future eco-nomic benefits to the enterprise are expected to flow.
Financial reporting quality
Long-term contract
Floor traders or locals
Assets