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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. The average exchange rate - with individual currencies weighted by their importance in U.S. international trade.
Versioning
Trade-weighted index
Sample excess kurtosis
Payer swaption
2. A transaction in exchange-listed deriva-tive markets in which a party re-enters the market to close out a position.
Offsetting
Marketability discount
Manufacturing resource planning (MRP)
Box spread
3. The difference between the yield on a bond and the yield on a default-free security - usu-ally a government note - of the same maturity. The yield spread is primarily determined by the mar-ket's perception of the credit risk on the bond.
Yield spread
Leverage
Volatility
Point of sale
4. The differ-ence between reported net income on an accrual basis and the cash flows from operating and investing activities compared to the average net operating assets over the period.
Presentation currency
Cash-flow-statement-based accruals ratio
Deferred tax assets
Sandwich spread
5. In the context of customer receipts - the amount of money that is in transit between pay-ments made by customers and the funds that are usable by the company.
Float
Monitoring costs
Simple interest
Cash flow additivity principle
6. An option in which the underlying value equals the exercise price.
Credit scoring model
At the money
Brokerage
Target balance
7. Under IFRS - the liability of a defined benefit pension.
Owners' equity
Cost-of-service regulation
Indirect format (indirect method)
Defined benefit obligation
8. Profits lost from not having suffi-cient inventory on hand to satisfy demand.
Terminal share price
Cross-sectional data
Stock-out losses
Cash flow additivity principle
9. CMT A hypothetical U.S. Treasury note with a constant maturity. A CMT exists for various years in the range of 2 to
Managerialism theories
Orthogonal
Roy's safety first criterion
Constant maturity treasury or
10. A random variable that can take on at most a countable number of possi-ble values.
Cost of capital
Cointegrated
Discrete random variable
Operating breakeven
11. 1) The simultaneous purchase of an undervalued asset or portfolio and sale of an over-valued but equivalent asset or portfolio - in order to obtain a riskless profit on the price differential. Taking advantage of a market inefficiency in a risk-free
Arbitrage
Residual dividend approach
Sample excess kurtosis
Lower bound
12. The portion of the dependent variable that is not explained by the independent vari-able(s) in the regression.
Economic order quantity-reorder point
Logit model
Error term
Sample excess kurtosis
13. A valuation ratio calculated as price per share divided by book value per share.
Liquidity discount
Cost of preferred stock
Price to book value
Book value equity per share
14. The strongest form of short-term bank borrowing facilities; they are in effect for multiple years (e.g. - 3-5 years) and may have optional medium-term loan features.
Sandwich spread
Tracking portfolio
Revolving credit agreements
Period costs
15. Time thought of as advancing in dis-tinct finite increments.
Up transition probability
Put-call-forward parity
Discrete time
Growth phase
16. Factors that affect the average returns of a large number of different assets.
Systematic factors
Optimal capital structure
Due diligence
Losses
17. A finance perspective on capital markets that deals with the relationship of price to intrinsic value. The traditional efficient mar-kets formulation asserts that an asset's price is the best available estimate of its intrinsic value. The rational ef
Probability
Gross income multiplier (GIM)
Market efficiency
Tie-in sales
18. The evaluation of credit risk; the evaluation of the creditworthiness of a borrower o r counterpar ty.
Expectational arbitrage
Balance-sheet-based aggregate accruals
Credit analysis
Liquidity ratios
19. A procedure for determining the interest on a bond or loan in which the interest is added onto the face value of a contract.
Point estimate
Stock grants
Add-on interest
Debt incurrence test
20. The probability that an asset's value moves down in a model of asset price dynamics.
Down transition probability
Earnings management activity
Quantile (or fractile)
Exercise or exercising the option
21. A test of a strategy or model using a sample outside the time period on which the strategy or model was developed.
Residual autocorrelations
Out-of-sample test
Tangible assets
Probability distribution
22. With reference to events - the propertythat the occurrence of one event does not affect the probability of another event occurring.
Independent
In-sample forecast errors
Other post-employment benefits
U.S. GAAP and uniting of interests under IFRS
23. An unlimited funds environment assumes that the company can raise the funds it wants for all profitable projects simply by paying the required rate of return.
Unlimited funds
Default risk premium
Free cash flow
Sunk cost
24. The use of inventory as collat-eral for a loan. Though the lender has claim to some or all of the company's inventory - the com-pany may still sell or use the inventory in the ordi-nary course of business.
Compiled f'mancial statements
Seats
Inventory blanket lien
Nonparametric test
25. Observations on characteristic(s) of the same observational unit through time.
Bill-and-hold basis
Residual autocorrelations
Longitudinal data
Standardized beta
26. Under U.S. GAAP - a measure used in estimating a defined-benefit pen-sion plan's liabilities - defined as 'the actuarial present value as of a date of all benefits attributed by the pension benefit formula to employee ser-vice rendered prior to that
Priced risk
Lack of marketability discount
Projected benefit obligation
Node
27. A swaption that allows the holder to enter into a swap as the fixed-rate payer and floating-rate receiver.
Current cost
Bond option
No-growth value per share
Payer swaption
28. A reduction or discount to value that reflects the lack of depth of trading or liquid-ity in that asset's market.
Seats
Look-ahead bias
Liquidity discount
Days of sales outstanding (DSO)
29. A guarantee from the clear-inghouse that if one party makes money on a transaction - the clearinghouse ensures it will be paid.
Target semivariance
Performance guarantee
Current ratio
Blockage factor
30. A multivariate classification technique used to discriminate between groups - such as companies that either will or will not become bankrupt during some time frame.
Discrintinant analysis
Delta
Hostile transaction
Consolidation
31. Aka 'Residual income.'
Qualifying special purpose entities
Abnormal earnings
Simple interest
Days of inventory on hand (DOH)
32. 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.
Direct income capitalization approach
Pure factor portfolio
Monetary/nonmonetary method
Box spread
33. Serial correlation in which a positive e rror for one observation increases the chance of a negative error for another observation - and vice versa.
Basis point value (BPV)
Negative serial correlation
Net book value
Financial flexibility
34. A long-term pattern of movement in a partic-ular direction.
Risk-neutral probabilities
Trend
Discrete random variable
Assets
35. A profitability ratio calcu-lated as net income divided by average total assets; indicates a company's net profit generated per dollar invested in total assets.
Cash flow additivity principle
Sum-of-the-parts valuation
Return on assets (ROA)
Scaled earnings surprise
36. A loan in which the interest rate is reset at least once after the starting date.
Income statement (statement of operations or profit and loss statement)
Floating-rate loan
Split-rate
Breakup value or private market value
37. The use of fixed costs in operations.
Sustainable growth rate
Operating leverage
Chart of accounts
Mean reversion
38. The part of the execution step of the portfolio management process that involves the implementation of port-folio decisions by trading desks.
Portfolio implementation problem
Completed contract
Present value model or discounted cash flow model
Statistical factor models
39. The portfolio that exploits an arbitrage opportunity.
Arbitrage portfolio
Conversion factor
Terminal share price
Dumping
40. A person or country has a comparative advantage in an activi ty if that person or country can perform the activity at a lower opportunity cost than anyone else or any other country.
Goodwill
Geometric mean
Comparative advantage
Winsorized mean
41. Quantiles that divide a distribution into five equal parts.
Per unit contribution margin
No-growth company
Stratified random sampling
Quintiles
42. The ratio of the percentage change in net income to the percent-age change in operating income; the sensitivity ofthe cash flows available to owners when operating income changes.
Payer swaption
In-sample forecast errors
Annuity due
Degree of financial leverage (DFL)
43. An agreement between two parties in which one party - the buyer - agrees to buy from the other party - the seller - an underlying asset at a later date for a price established at the start of the contract.
Dirty surplus accounting
Pseudo-random numbers
Independent variable
Forward contract
44. Linear regression involv-ing two or more independent variables.
Multiple linear regression
Value at risk (VAR)
Mutually exclusive events
Robust
45. Net earnings avail-able to common shareholders (i.e. - net income minus preferred dividends) divided by the weighted average number of common shares out-standing during the period.
Recapture premium
Mean excess return
Basic earnings per share (EPS)
Project sequencing
46. A reserve created against deferred tax assets - based on the likelihood of realizing the deferred tax assets in future account-ing periods.
Valuation allowance
Independent projects
Dilution
Top-down forecasting approach
47. A measure of central tendency computed by taking the nth root of the product of n non-negative values.
Permutation
Geometric mean
Laddering strategy
Unearned fees
48. An ordered listing.
Tracking risk
Net exports
Permutation
Purchase method
49. 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) .
Long
Tracking portfolio
Number of days of receivables
Dead-hand provision
50. The share price at a particular point in the future.
Payoff
Terminal share price
Strangle
Deep in the money
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