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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. The day that employees actually exer-cise the options and convert them to stock.






2. A method for estimating the betafor a company or project; it requires using a com-parable company's beta and adjusting it for finan-cialleverage differences.






3. The buyer of a derivative contract. Also refers to the position of owning a derivative.






4. 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






5. The earnings per share that a busi-ness could achieve currently under mid-cyclical conditions.






6. Depositary Receipt A negotiable certifi -cate issued by a depositary bank that represen ts ownersh ip in a non-U .S. company's deposi ted equity (i.e. - equity held in custody by the deposi-tary bank in the company's home market).






7. The government's holding of foreign cun; - e.!}cy.






8. Controlling additional property throughreinvestment - refinancing - and exchanging.






9. A portfolio with sensitivity of 1to the factor in question and a sensitivity of 0 to allother factors.






10. 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.






11. Another term for the historical method of estimating VAR. This term is somewhat misleading in that the method involves not a simulation of the past butrather what actually happened in the past - some-times adjusted to reflect the fact that a differen






12. A probability drawing on per-sonal or subjective judgment.






13. Debt and equity secu-rities not classified as either held-to-maturity or held-for-trading securities. The investor is willing to sell but not actively planning to sell. In general - available-for-sale securities are reported at fair value on the bala






14. Dummy variables used as dependent variables rather than as inde-pendent variables.






15. Stan-dard errors of the estimated parameters of a regression that correct for the presence of het-eroskedasticity in the regression's error term.






16. A stage of growth in which the com-pany reaches an equilibrium in which investment opportunities on average just earn their opportu-nity cost of capital.






17. The correlation of a time series with its own past values.






18. The problem or issue of popu-lation regression parameters that have changed over time.






19. An Activity ratio calculated as total revenue divided by average net fixed assets.






20. The restatement of financial statement items using a common denominator or reference item that allows one to identify trends and major differences; an example is an income statement in which all items are expressed as a percent of revenue.






21. Market makers that buy and sell by quoting a bid and an ask price. They are the primary providers ofliquidity to the market.






22. The difference between the maximum and minimum values in a dataset.






23. A weighted average of the after-tax required rates of return on a company's common stock - preferred stock - and long-term debt - where the weights are the fraction of each source of financing in the company's target capital structure.






24. 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.






25. The date on which a derivative con-tract expi res.






26. A method of accounting in which combined companies were portrayed as if they had always operated as a single economic entity. Called pooling of interests under U.S. GAAP and uniting of interests under IFRS. (No longer allowed under U.S. GAAP or IFRS.






27. The party obtaining the use of an asset through a lease.






28. An approach to portfolio analysis using expected means - variances - and covariances of asset returns.






29. 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.






30. The autocorrelation of the error term.






31. With reference to statistical infer-ence - the subdivision dealing with the testing ofhypotheses about one or more populations.






32. The set of rules used to select a sample.






33. A wholly-owned sub-sidiary of a company that is established to provide financing of the sales of the parent company.






34. The U.S. interest rate minus the foreign interest rate.






35. Amounts owed by a business to credi-tors as a result of borrowings that are evidenced by (short-term) loan agreements. n-Period moving average The average of the current and immediately prior n - 1 values of a time series.






36. 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.






37. A company without positive expected net present value projects.






38. A form of restructuring in which sharehold-ers of a parent company receive a proportional number of shares in a new - separate entity; share-holders end up owning stock in two different companies where there used to be one.






39. The principle that dol-lar amounts indexed at the same point in time are additive.






40. Costs that remain at the same level regardless of a company's level of production and sales.






41. Under IFRS - the liability of a defined benefit pension.






42. The sum of the sample observations - divided by the sampfe size.






43. A profitabili ty ratio calcu-lated as EBIT divided by the sum of short-and long-te debt and equi ty.






44. A country that during its entire his-tory has borrowed more in the rest of the world than other countries have lent in it.






45. An amount or percent-age deducted from the pro rata share of 100 per-cent of the value of an equity interest in a business to reflect the absence of some or all of the powers of control.






46. A purchase involving a buyer having essentially no material synergies with the target (e.g. - the purchase of a private company by a company in an unrelated industry or by a private equity firm would typically be a financial transaction) .






47. The set of assets available for investment.






48. An inventory accounting method in which the sales value of an item is reduced by the gross margin to calculate the item's cost.






49. The risk that a financial instrument cannot be purchased or sold without a significant concession in price due to the size of the market.






50. The price multiple for a stock assumed to hold at a stated future time.