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Test your basic knowledge |
CFA Level2 Vocab
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Subjects
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
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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. An updated probability that reflects or comes after new information.
Risk premium
Univariate distribution
Mutually exclusive projects
Posterior probability
2. Unsecured short-term corporate debt that is characterized by a single payment at maturity.
Grouping by nature
Sample statistic or statistic
Commercial paper
Nominal exchange rate
3. A strategy in which a position is hedged by making frequent adjustments to the quantity of the instrument used for hedging in relation to the instrument being hedged.
Management buyout (MBO)
Target payout ratio
Cash-flow-statement-based aggregate accruals
Dynamic hedging
4. The cash flow available to a company's common shareholders after all operat-ing expenses - interest - and principal payments have been made - and necessary investments in working and fixed capital have been made.
Bond yield plus risk premium approach
Free cash flow to equity
Range
Target semivariance
5. The relationship of the quantity of an asset being hedged to the quantity of the deriva-tive used for hedging.
Held-to-maturity investments
Sample statistic or statistic
Matrix pricing
Hedge ratio
6. An option in which the asset underlying the futures is a commodity - such as oil - gold - wheat - or soybeans.
Shortfall risk
Carrying amount (book value)
Commodity option
Futures contract
7. The after-tax net operating profits as a percent of total assets or capital.
Cost leadership
Node
Dividend discount model (DDM)
Return on invested capital (ROIC)
8. An active investment strategy that includes intentional matching of the timing of cash outflows with investment maturities.
Float
Projected benefit obligation
Price multiple
Matching strategy
9. A probability distribution that specifies the probabilities for a group of related random variables.
Multivariate distribution
Direct f'mancing lease
Precautionary stocks
Nonconventional cash flow
10. An activity ratio equal to the number of days in period divided by receivables turnover.
Winner's curse
Days of sales outstanding (DSO)
Absolute dispersion
Active investment managers
11. The elimination or phasing out of reg-ulations on economic activity.
Special purpose entity (special purpose vehicle or variable interest entity)
Semideviation
Deregulation
Degrees of freedom (df)
12. A balance sheet that does not show subtotals for current assets and current liabilities.
Implied repo rate
Trade receivables (commercial receivables or accounts receivable)
Unclassified balance sheet
Normalized
13. Ratios that measure a company's ability to meet its long-term obligations.
Debt-to-equity ratio
Solvency ratios
World Trade Organization
Liquidity
14. Each value on a binomial tree from which suc-cessive moves or outcomes branch.
Free cash flow to equity
New growth theory
Node
Qualifying special purpose entities
15. The slope of the capital market line - indicating the market risk premium for each unit of market risk.
Market price of risk
Currency option
Normal backwardation
Derivatives dealers
16. Activities related to obtaining or repaying capital to be used in the business (e.g. - equity and long-term debt).
Externality
Financing activities
Factor
First-order serial correlation
17. Individual accounts to which an employee and typically the employer makes contributions - generally on a tax-advantaged basis. The amounts of contributions are defined at the outset - but the future value of the benefit is unknown. The employee bears
Platykurtic
Defined-contribution pension plans
Initial margin requirement
Linear interpolation
18. A probability drawing on per-sonal or subjective judgment.
Subjective probability
Segment margin
Nonlinear relation
Partnership
19. A result indicating that the null hypothesis can be rejected; with reference to an estimated regression coefficient - frequently understood to mean a result indicating that the corresponding population regression coefficient is different from O.
Number of days of receivables
Cannibalization
Independent
Statistically significant
20. A record of receipts from exports of goods and services - payments for imp<ilrts of goods and services - net income and net transfers received from the rest of the world.
Company fundamental factors
Multi-step format
Current account
Active specific risk or asset selection risk
21. The existence of an exact linear relation between two or more independent vari-ables or combinations of independent variables.
Unexpected earnings (also earnings surprise)
Perfect collinearity
Other comprehensive income
Guideline transactions method
22. A form ofcommon-size analysis in which the accounts in agiven period are used as the benchmark or baseperiod - and every account is restated in subse-quent periods as a percentage of the base period'ssame account.
Ordinary shares (common stock or common shares)
Forward P/E (also leading P/E or prospective P/E)
Horizontal common-size analysis
Asian call option
23. For data grouped into intervals - the fraction of total observations that are less than the value of the upper limit of a stated interval.
Unidentifiable intangible
Cumulative relative frequency
Exchange ratio
Mature growth rate
24. In the context of inventory management - the need for inventory as part of the routine production-sales cycle.
Current ratio
Bill-and-hold basis
Transactions motive
Benchmark value of the multiple
25. The earnings per share that a busi-ness could achieve currently under mid-cyclical conditions.
Exit price
Normalized earnings per share (or normal earnings per share)
New growth theory
Historical cost
26. With reference to an interval of grouped data - the number of observations in the interval divided by the total number of observa-tions in the sample.
Serially correlated
Relative frequency
Functional currency
Put-call-forward parity
27. European option An option contract that can only be exercised on its expiration date.
European-style option or
Free cash flow to the
Cost of capital
Credit analysis
28. With reference to a time series - the underly-ing model generating the times series.
Equity
Enterprise risk management
Face value (also principal - par value - stated value - or maturity value)
Regime
29. A solvency ratio measuring the number of times interest and lease payments are covered by operating income - calculated as (EBIT + lease payments) divided by (interest payments + lease payments).
Fixed charge coverage
New growth theory
Sales returns and allowances
Autoregressive (AR) model
30. An association or relationship between variables that cannot be graphed as a straight line.
Nonlinear relation
Liquidity ratios
Asset-based loan
Current ratio
31. With respect to inventory accounting - the planned or target unit cost of inventory items or services.
Standard cost
Efficient portfolio
Local currency
IRR rule
32. The minimum rate of return required by an investor to invest in an asset - given the asset's riskiness.
Required rate of return
Earnings expectation management
Securities offering
Add-on interest
33. An intangible that cannot be acquired singly and that typically possesses an indefinite benefit period; an example is account-ing goodwill.
Accumulated benefit obligation
Ratio spread
Single-payment loan
Unidentifiable intangible
34. An inter-national agreement signed in 1947 to reduce tar-iffs on international trade.
Tobin's q
Top-down analysis
Time-weighted rate of return
General Agreement on Tariffs and Trade
35. The amount of cash payable by a company to the bondholders when the bonds mature; the promised payment at maturity sepa-rate from any coupon payment.
Geometric mean
Quick ratio - or acid test ratio
Face value (also principal - par value - stated value - or maturity value)
Clearinghouse
36. A mean computed after excluding a stated small percentage of the lowest and highest observations.
Taxable temporary differences
Trimmed mean
Method based on forecasted fundamentals
Free cash flow
37. The differential of infor-mation between corporate insiders and outsiders regarding the company's performance and prospects. Managers typically have more informa-tion about the company's performance and prospects than owners and creditors.
Supernormal growth
Multivariate distribution
synunetric information
Benchmark value of the multiple
38. A minimum level of cash to be held available-estimated in advance and adjusted for known funds transfers - seasonality - or other factors.
Lower bound
Breakup value or private market value
Target balance
Closeout netting
39. The price for immediate purchase of the underlying asset.
Cash price or spot price
Inverse floater
Payment netting
Long-lived assets (or long-term assets)
40. An investment decision rule that accepts projects or investments for which the IRR is greater than the opportunity cost of capital.
IRR rule
Winner's curse
Interest rate forward
Up transition probability
41. The actual return on a debt security if it is held to maturity.
Unearned fees
Yield
U.S. official reserves
Takeover
42. A procedure for determining the interest on a loan or bond in which the interest is deducted from the face value in advance.
Profitability ratios
Legislative and regulatory risk
Bargain purchase
Discount interest
43. Amounts that a business owes to its vendors for goods and services that were pur-chased from them but which have not yet been paid.
Degree of financial leverage (DFL)
Accounts payable
Earnings per share
Scaled earnings surprise
44. Covering or containing all possible outcomes.
Purchasing power loss
Exhaustive
Uniting of interests method
Treasury shares
45. The granting of stock to employees as a form of compensation.
Stock grants
Sampling distribution
Cheapest to deliver
Top-down investing
46. 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.
Call
Credit analysis
Supernormal growth
Cash
47. Assets that can be most readily con-verted to cash (e.g. - cash - short-term marketable investments - receivables) .
Operating activities
Balance-sheet-based accruals ratio
No-growth value per share
Quick assets
48. A criterion asserting that the optimal portfolio is the one that minimizes the probability that portfolio return falls below a threshold level.
49. The process of obtaining a sample.
Error term
Sampling
Deregulation
Simple interest
50. A type of subsidiary engaged in derivatives trans-actions that is separated from the parent company in order to have a higher credit rating than the parent company.
Discounted cash flow analysis
Tangible book value per share
Residual claim
Enhanced derivatives products companies (EDPC)