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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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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. Private equity investors in development-stage companies.
Credit derivatives
North
Venture capital investors
Normalized earnings
2. Describes a distribution that is less peaked than the normal distribution.
Trailing P/E (or current PIE)
Platykurtic
Off-balance sheet imancing
Synthetic forward contract
3. A distribution that specifies the probabilities of a random variable's possible outcomes.
Joint probability
Probability distribution
Interest rate swap
Discount
4. CMT swap A swap in which the floating rate is the rate on a security known as a constant maturity treasury or CMT security.
Constant maturity swap or
Theory of contestable markets
Unconditional heteroskedasticity
Termination date
5. The unsold units of product on hand.
Market risk premium
Just-in-time method
Retail method
Inventory
6. Accounting in which some income items are reported as part of stockholders' equity rather than as gains and losses on the income statement; certain items of comprehensive income bypass the income statement and appear as direct adjustments to sharehol
Venture capital investors
Acquisition
Cumulative relative frequency
Dirty surplus accounting
7. The rule that - on the average - with no change in technology - a 1 percent increase in capital per hour of labor brings a 1/3 percent increase in labor productivity.
Arbitrage
Measurement scales
One third rule
Standard cost
8. The mix of a company's variable costsand fixed costs.
Cost structure
Accounting profit (income before taxes or pretax income)
Diluted shares
Continuing residual income
9. 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.
Before-tax cash flow
Nominal exchange rate
Capitalization rate
Rule of 70
10. The error of rejecting a true null hypothesis.
Securities offering
Type II error
Dirty surplus items
Type I error
11. A variation of a forward contract that has essentially the same basic definition but with some additional features - such as a clearing-house guarantee against credit losses - a daily settlement of gains and losses - and an organized electronic or fl
Target company - or target
Futures contract
Log-log regression model
Error autocorrelation
12. A ratio in property valua-tion; net operating income divided by sale price. Also known as the going-in rate.
Currency swap
NTM P/E
Overall capitalization rate
Unearned revenue (deferred revenue)
13. Theories that posit that cor-porate executives are motivated to engage in mergers to maximize the size of their company rather than shareholder value.
Price discovery
Managerialism theories
Net profit margin (profit margin or return on sales)
Alpha (or abnormal return)
14. The ratio of the market value of debt and equity to the replacement cost of total assets.
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15. The stage of growth between the growth phase and the mature phase of a company in which earnings growth typically slows.
Time value or speculative value
Semivariance
Log-log regression model
Transition phase
16. A rule explaining the expected value of a random vari-able in terms of expected values of the random variable conditional on mutually exclusive and exhaustive scenarios.
Total probability rule for expected value
Time value of money
Multiplication rule for probabilities
Operating leverage
17. Probabilities that generally do not vary from person to person; includes a pri-ori and objective probabilities.
Broker
Objective probabilities
Total probability rule for expected value
White sqnire
18. The ratio of gross profi t to revenues.
Gross profit argin
Estimate
Synthetic index fund
Trade-weighted index
19. The amount at which an asset or liability is valued according to account-ing principles.
Equity options
Pairs trading
Debt with warrants
Carrying amount (book value)
20. Quantiles that divide a distribution into 100 equal parts.
Incremental cash flow
Combination
Percentiles
Diffuse prior
21. Time thought of as advancing in extremely small increments.
Continuous time
Efficiency
Traditional efficient markets formulation
Homoskedasticity
22. With reference to assets - the amount of cash or cash equivalents that could currently be obtained by sell ing the asset i an orderly disposal; with reference to lia-bilities - the undiscounted amount of cash or cash equivalents expected to be paid t
Realizable value (settlement value)
Neoclassical growth theory
Covariance stationary
Net asset balance sheet exposure
23. A money measure of the goods and services produced within a country's borders over a stated time period.
Interest rate
Gross domestic product
Level of significance
Price discovery
24. 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
Completed contract
Point estimate
Accounts payable
Imputation
25. The potential for asymmetric information to bring about a general decline in product quality in an industry.
Lemons problem
Operating breakeven
Event
Forward integration
26. Factors that affect the average returns of a large number of different assets.
Portfolio performance attribution
Systematic factors
Sales risk
Sensitivity analysis
27. A variation of a floating-rate note that has some type of unusual characteristic such as a leverage factor or in which the rate moves opposite to interest rates.
Likelibood
Grouping by function
Structured note
Cash-generating unit
28. An option that gives the holder the right to buy an underlying asset from another party at a fixed price over a specific period of time.
Cross-sectional analysis
Call
Fundamental beta
Guideline public companies
29. The relative price of foreign-made goods and services to U.S. -made goods and services.
Capital structure
Rule of 70
Monitoring costs
Real exchange rate
30. Aka 'Residual income. '
Basic earnings per share (EPS)
Income tax payable
Economic profit
Build-up method
31. Uncorrelated; at a right angle.
Daily settlement
Orthogonal
Subsistence real wage rate
Protective put
32. 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
Covered interest arbitrage
Rule of 72
Multivariate distribution
Semideviation
33. The average squared deviation below a target value.
Target semivariance
Economic exposure
Focus
Roy's safety first criterion
34. A financial statement that reconciles beginning-of-period and end-of-period balance sheet values of cash; consists of three parts: cash flows from oper-ating activities - cash flows from investing activities - and cash flows from financing activities
Degree of financial leverage (DFL)
Cash flow statement (statement of cash flows)
Active risk squared
Bayes' formula
35. The part of the execution step of the portfolio management process that involves the implementation of port-folio decisions by trading desks.
Debit
Portfolio implementation problem
Frequency distribution
Target semivariance
36. When a company is acquired and the purchase price is less than the fai r value of the net assets. The current treatment of the excess of fair value over the purchase price is diffe re t under IFRS and U.S. CAAP. The excess is never accounted for as n
Bargain purchase
Finance lease (capital lease)
Other post-employment benefits
Other comprehensive income
37. An annuity with a first cash flow that is paid one period from the present.
Monetary/nonmonetary method
Ordinary annuity
Implied volatility
Double declining balance depreciation
38. A model of intrinsic value that views the value of an asset as the present value of the asset's expected future cash flows.
Robust
Balance sheet (statement of fmandal position or state-ment of fmandal condition)
Present value model or discounted cash flow model
Debt rating approach
39. Short-term obligations - such as accounts payable - wages payable - or accrued liabil-ities - that are expected to be settled in the near future - typically one year or less.
Statement of retained earnings
Sharpe's measure
Current liabilities
Autoregressive (AR) model
40. With reference to regression analysis - the estimated values of the population intercept and population slope coeffi-cien t(s) in a regression.
Foreign currency transactions
Estimated (or fitted) parameters
Dependent
Sampling
41. A value at or below which a stated fraction of the data lies.
Covariance matrix
Balance sheet ratios
Current liabilities
Quantile (or fractile)
42. An option in which the asset underlying the futures is a commodity - such as oil - gold - wheat - or soybeans.
Commodity option
Nonconventional cash flow
Commodity futures
Inverse floater
43. Residual income after the forecast horizon.
Unidentifiable intangible
Free cash flow hypothesis
Earnings management activity
Continuing residual income
44. The loss in the value of an option resulting from movement of the option price toward its payoff value as the expiration day approaches.
Operating lease
Time value decay
Spearman rank correlation coefficient
Statistical inference
45. 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.
Quota
Sampling
Inverse floater
Business risk
46. The expected value (the probability-weighted average) of squared deviations from a random variable's expected value.
Deliveryoption
Variance
Descriptive statistics
Scatter plot
47. A sample measure of the degree of dispersion of a distribution - calculated by dividing the sum of the squared deviations from the sam-ple mean by the sample size minus 1.
Cash flow additivity principle
Centralization permits economies of scale and allows a company to use some of its risks to offset other risks.
Sample variance
Exercise or exercising the option
48. The use of computer networks to conduct financial transactions electronically.
Residual autocorrelations
Economic exposure
Degrees of freedom (df)
Electronic funds transfer
49. With reference to regression - the set of variables included in the regression and the regression equation's functional form.
Market approach
Regulatory risk
Model specification
Payment netting
50. Long-term assets with physical sub-stance that are used in company operations - such as land (property) - plant - and equipment.
Risk governance
Two-sided hypothesis test (or two-tailed hypothesis test)
Tangible assets
Quick ratio - or acid test ratio