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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. With reference to investmentselection processes - an approach that involves selection from all securities within a specified investment universe - i.e. - without prior narrowiNg of the universe on the bas' s of macroeconomj c or overall market consid
Bottom-up analysis
Unexpected earnings (also earnings surprise)
Spearman rank correlation coefficient
Losses
2. The day that the company actually mails out (or electronically transfers) a dividend payment.
Flotation cost
Active portfolio
U.S. interest rate differential
Payment date
3. A variation of a straddle in which the put and call have different exercise prices.
Market-oriented investors
Sample mean
Strangle
Bond indentnre
4. The yield to maturity on a basis that ignores compounding.
Comparables (comps - guideline assets - guideline com-panies)
Performance measurement
Bond-equivalent yield
Assets
5. Aka Harmonic mean.
Financial flexibility
Real exchange rate
Period costs
Weighted harmonic mean
6. A financial statement that reconciles the beginning-of-period and end-of-period balance sheet values of shareholders' equity; provides information about all factors affecting shareholders' equity.
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7. The official price - designated by the clearinghouse - from which daily gains and losses will be determined and marked to market.
Time-series data
Two-sided hypothesis test (or two-tailed hypothesis test)
Settlement price
Lemons problem
8. Aka marking to market.
Taxable income
Per unit contribution margin
Entry price
Daily settlement
9. 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.
White sqnire
Out-of-sample forecast errors
Arithmetic mean
Bear spread
10. An active investment strategy that includes intentional matching of the timing of cash outflows with investment maturities.
Margin
Segment turnover
Fundamental factor models
Matching strategy
11. An option strategy in which a long position in a certain number of options is offset by a short position in a certain number of other options on the same underlying - resulting in a risk-free position.
Earnings per share
Interest rate cap or cap
Ratio spread
Minimum-variance frontier
12. The currency in which finan-cial statement amounts are presented.
Imputation
Discounted cash flow analysis
Presentation currency
Unidentifiable intangible
13. With reference to regression - the set of variables included in the regression and the regression equation's functional form.
Model specification
Hmnan capital
Forward price or forward rate
Current exchange rate
14. The rate of return required by suppliers of capital for an individual source of a company's funding - such as debt or equity.
Component cost of capital
IRR rule
Scalper
No-growth company
15. A measure of VAR equivalentto the analytical method bu t that refers to the use of delta to estimate the option's price sensitivity.
Sharpe ratio
Rate of return
Alternative hypothesis
Delta-normal method
16. An activity ratio equal to the number of days in the period divided by inventory turnover over the period.
Free cash flow to the
Days of inventory on hand (DOH)
Per unit contribution margin
Total probability rule
17. The nonmonetary return offered by an asset when the asset is in short supply - often associated with assets with seasonal production processes.
Takeover premium
Convenience yield
Continuing residual income
Current assets - or liquid assets
18. In the context of the weighted average cost of capital (WACC) - a break point is the amount of capital at which the cost of one or more of the sources of capital changes - leading to a change in the WACC.
Break point
Exit price
Company fundamental factors
Time value or speculative value
19. 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.
Performance guarantee
Free cash flow to the
Floor
Descriptive statistics
20. The portfolio that exploits an arbitrage opportunity.
Bill-and-hold basis
Arbitrage portfolio
Mature phase
Lockbox system
21. The share price at a particular point in the future.
Terminal share price
Interest rate collar
Capital allocation line (CAL)
Plain vanilla swap
22. The amount for which one can sell some-thing - or the amount one must pay to acquire something.
Transaction exposure
Subsidiary merger
Serially correlated
Value
23. The portion of an entity's income that is subject to income taxes under the tax laws of its jurisdiction.
Taxable income
Deductible temporary differences
Quick ratio - or acid test ratio
Economic sectors
24. A specialized computer program or a spreadsheet that solves for the portfolio weights that will result in the lowest risk for a specified level of expected return.
Sample variance
Direct debit program
Debtor nation
Optimizer
25. The slope of the capital market line - indicating the market risk premium for each unit of market risk.
Breakeven point
Market price of risk
Aging schedule
Intrinsic value or exercise value
26. Selling a product in slightly altered forms to different groups of consumers.
Deductible temporary differences
Yield to maturity
Antidilutive
Versioning
27. Quantiles that divide a distribution into 10 equal parts.
Deciles
Provision
Free cash flow to the
Captive rmance subsidiary
28. A procedure used primarily in futures markets in which the parties to a contract settle the amount owed daily. Also known as the daily settlement.
Butterfly spread
Marking to market
Performance measurement
Cash flow from operations (cash flow from operating activities or operating cash flow)
29. Quantiles that divide a distribution into five equal parts.
Monetary assets and liabilities
Quintiles
Protective put
Total probability rule for expected value
30. A spontaneous form of credit in which a purchaser of the goods or service is financing its purchase by delaying the date on which payment is made.
Corporate raider
Opportunity cost
Macaulay duration
Trade credit
31. The market value of debt and equity.
Trading securities (held-for-trading securities)
Market value of invested capital
Bayes' formula
Shortfall risk
32. The intercept and slope coefficient(s) of a regression.
Her rmdahl-
Revenue
Other comprehensive income
Regression coefficients
33. An option to enter into a swap.
Specific identification method
Swaption
Current liabilities
Variance
34. A number between - 1 and + 1 that measures the co-movement (linear association) between two random variables.
Put-call parity
Correlation
Annuity
No-growth company
35. The divisor in the expression for the value of a perpetuity.
Lessor
Risk premium
Capitalization rate
Classical growth theory
36. A procedure for determining the interest on a loan or bond in which the interest is deducted from the face value in advance.
Receiver swaption
Trade credit
Portfolio implementation problem
Discount interest
37. For accounting purposes - the exchange rates that existed when the assets and liabilities were initially recorded.
Dead-hand provision
Direct format (direct method)
Cnsistent
Historical exchange rates
38. The mix of debt and equity that a company uses to finance its business; a company's specific mixture of long-term financing.
Liruit up
Single-payment loan
Forward rate agreement (FRA)
Capital structure
39. The fixed price or rate at which the transaction scheduled to occur at the expiration of a forward contract will take place. This price is agreed on at the initiation date of the contract.
Lessee
Net realizable value
Forward price or forward rate
Unconditional probability (or marginal probability)
40. The first date that a share trades without (i.e. - 'ex') the dividend.
Ex-dividend date
Enhanced derivatives products companies (EDPC)
Poison puts
Disbursement float
41. For a give period - equal to begi ning inventory minus entling inventory JDlusthe cost 0 goods auqui red or produced duringthe period.
Cost of goods sold
Homogenization
Null hypothesis
Purchasing power loss
42. The difference between net operating assets at the end and the beginning of the period compared to the average net operating assets over the period.
Descriptive statistics
Trend
Balance-sheet-based accruals ratio
Tax expense
43. A listing in which tile order of tile listed items does not matter.
Pre-investing
Cash o£ fering
Combination
Linear association
44. In the con-text of private company valuation - valuation model based on an assumption of a constant growth rate of free cash flow to the firm or a con-stant growth rate of free cash flow to equity.
Growth option or expansion option
Degree of total leverage
Capitalized cash flow model (method)
Days of inventory on hand (DOH)
45. The hypothesis accepted when the null hypothesis is rejected.
Money-weighted rate of return
Out-of-sample forecast errors
Alternative hypothesis
Hmnan capital
46. A method of identifying the basic elements of the overall capitalization rate.
Built-up method
American option
Operating leverage
Management buyout (MBO)
47. With reference to the error term of a regression - having a variance that differs across observations.
Stock-out losses
Heteroskedastic
Cash settlement
Partial regression coefficients or partial slope coeffi-cients
48. When a bankrupt company is allowed to enforce contracts that are favorable to it while walking away from contracts that are unfa-vorable to it.
Risk premium
Cherry-picking
Performance guarantee
Operating profit (operating income)
49. Commercial and investmentbanks that make markets in derivatives.
FIFO method
Derivatives dealers
White knight
Straight-line method
50. An activity ratio equal to the number of days in a period divided by the payables turnover ratio for the period; an estimate o the average { lUmber of days i takes a company to pay its su pliers.
Investment constraints
Initial public offering (IPO)
Eurodollar
Number of days of payables
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