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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 swaption that allows the holder to enter into a swap as the fixed-rate receiver and floating-rate payer.






2. The capital structure at which the value of the company is maximized.






3. The currency of the primary economic environment in which an entity operates.






4. The property of having a non-constant variance; refers to an error term with the property that its variance differs across observations.






5. A loan in which the borrower receives a sum of money at the start and pays back the entire amount with interest in a single pay-ment at maturity.






6. 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.






7. The particular value calculated from sam-ple observations using an estimator.






8. Financial ratios involving bal-ance sheet items only.






9. An option strategy that involves selling a put with a lower exercise price and buying a put with a higher exercise price. It can also be exe-cuted with calls.






10. Unsecured short-term corporate debt that is characterized by a single payment at maturity.






11. The ratio of a set of observations' standard deviation to the observa-tions' mean value.






12. The preference some investors have for shares that exhibit certain characteristics.






13. A liquidi ty ratio calculated as (cash + short-term marketable investments) divided by current liabilities; measures a company's ability to meet its current obligations with just the cash and cash equivalents on hand.






14. An aggregate of an entity's income tax payable (or recoverable in the case of a tax benefit) and any changes in deferred tax assets and liabili-ties. It is essentially the income tax payable or recoverable if these had been determined based on accoun






15. Present obligations of an enterprise aris-ing from past events - the settlement of which is expected to result in an outflow of resources embodying economic benefits; creditors' claims on the resources of a company.






16. The graph of the capital asset pricing model.






17. A swap in which the underlying is a commodity such as oil - gold - or an agricultural product.






18. The difference between revenue and expenses; what remains after subtracting all expenses (including depreciation - interest - and taxes) from revenue.






19. 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






20. With reference to time-series mod-els - a model in which the growth rate of the time series as a function of time is constant.






21. A two-dimensional plot of pairs of obser-vations on two data series.






22. A trader who offers to buy or sell futures contracts - holding the position for only a brief period of time. Scalpers attempt to profit by buy-ing at the bid price and selling at the higher ask price.






23. An equation expressing the equiva-lence (parity) of a portfolio of a call and a bondwith a portfolio of a put and the underlying -which leads to the relationship between put andcall prices






24. 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.






25. The strategy a company fol-lows with regard to the amount and timing of div-idend payments.






26. Increases in economic benefits in the form of inflows or enhancements of assets - or decreases of liabilities that result in an increase in equity (other than increases resulting from contribu-tions by owners) .






27. A method of presentation of accounting transactions in which effects on assets appear at the left and effects on liabilities and equity appear at the right of a central dividing line; also known as T-account format.






28. An act passed by the U.S. Con-gress in 1933 that specifies the financial and other significant information that investors must receive when securities are sold - prohibits misrepresenta-tions - and requires initial registration of all public issuance






29. A profitability ratio calculated as earnings before taxes divided by revenue.






30. The P/E to-growth ratio - calculated as the stock's PI E divided by the expected earnings growth rate.






31. A result in statistics that states that the sample mean computed from large sam-ples of size n from a population with finite vari-ance will follow an approximate normal distribution with a mean equal to the population mean and a variance equal to the






32. A merger in which the company being purchased becomes a subsidiary of the purchaser.






33. A theory pertaining to a company's optimal capital struc-ture; the optimal level of debt is found at the point where additional debt would cause the costs of financial distress to increase by a greater amount than the benefit of the additional tax sh






34. Analysis that shows the changes in key financial quantities that result from given (economic) events - such as the loss of customers - the loss of a supply source - or a catastrophic event; a risk management technique involving examina-tion of the pe






35. A fUl !lction giving the probability of joint occurrences of values of stated random variables.






36. The return that an investorearns during a specified holding period; a syn-onym for total return.






37. A quantitative measure of skew (lack of symmetry); a synonym of skew.






38. Costs associated with the conflict of interest present when a company is managed by non-owners. Agency costs result from the inher-ent conflicts of interest between managers and equity owners.






39. An offset to revenue reflecting any cash refunds - credits on account - and discounts from sales prices given to cus-tomers who purchased defective or unsatisfactory items.






40. A financial statement that provides information about a company's prof-itability over a stated period of time.






41. A measurement scale that has all the characteristics of interval measurement scales as well as a true zero point as the origin.






42. An agreement between two governments in which the government of the exporting country agrees to restrain the volume of its own exports.






43. An annuity having a first cash flow that is paid immediately.






44. An agreement between two parties to exchange a series of future cash flows.






45. As used in option pricing - the standard deviation of the continuously compounded returns on the underlying asset.






46. 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






47. A function giving the probability that a random variable is less than or equal to a specified value.






48. An approach to valuation that involves using a price multiple to evaluate whether an asset is relatively fairly valued - rela-tively undervalued - or relatively overvalued when compared to a benchmark value of the multiple.






49. Netting the market values of all contracts - not just derivatives - between parties.






50. The absorption of one company by another; two companies become one entity and one or both of the pre-merger companies ceases to exist as a separate entity.