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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. A merger or acquisition in which target shareholders are to receive shares of the acquirer's common stock as compensation.
Strap
Butterfly spread
Hedging
Securities offering
2. A merger involving companies at different positions of the same production chain; for example - a supplier or a distributor.
Statement of changes in shareholders' equity (state-ment of owners' equity)
Target company - or target
Sampling plan
Vertical merger
3. Futures contracts in which the underlying is a traditional agricultural - metal - or petroleum product.
Commodity futures
Degree of confidence
Scenario analysis
Information ratio (IR)
4. A measure of VAR equivalentto the analytical method bu t that refers to the use of delta to estimate the option's price sensitivity.
Band-of-investment method
Basis point value (BPV)
Binomial model
Delta-normal method
5. A value at or below which a stated fraction of the data lies.
Short
Trading securities (held-for-trading securities)
Quantile (or fractile)
Liquidity discount
6. The procedure of drawing a sample to satisfy the definition of a simple ran-dom sample.
Real options
Normal contango
Paired observations
Simple random sampling
7. A principle stating that the pr:obability that A or B occurs (both occur) equals he probabili ty thab A occ rs - plus the probabir ty tha~ B occurs - minus the probabil-ity that both A and B occur.
Maturity premium
Holder-of-record date
Addition rule for probabilities
LIFO layer liquidation (LIFO liquidation)
8. The risk of a change in value between the transaction date and the settlement date of an asset or liability denominated in a for-eign currency.
Agency problem - or principal-agent problem
Transaction exposure
Economic exposure
Outliers
9. An industry's underlying eco-nomic and technical characteristics.
Industry structure
Expiration date
Installment method (installment-sales method)
Crawling peg
10. The goods and services that we sell to peo-ple in other countries.
Floored swap
Exports
Stated rate (nominal rate or coupon rate)
Liquidity
11. The slope coefficients in a multiple regression.
Market risk
Projected benefit obligation
Direct income capitalization approach
Partial regression coefficients or partial slope coeffi-cients
12. The application of a set of criteria to reduce a set of potential investments to a smaller set having certain desired characteristics.
Independent
Sandwich spread
Fixed-rate perpetual preferred stock
Screening
13. The operational flexibility to adjust prices when demand varies from forecast. For example - when demand exceeds capacity - the company could benefit from the excess demand by increasing prices.
Price-setting option
American
Alpha (or abnormal return)
Account format
14. A financial instrument whose valuede ends on the value of some nderlying asset orfactor (e.g. - a stock price - an interest rate - orexchange rate ).
Derivative
Present value model or discounted cash flow model
Statistically significant
Fundamental beta
15. Assets that are expected to bene-fit the company over an extended period of time (usually more than one year).
Accrued interest
After-tax equity reversion (ATER)
Cyclical businesses
Noncurrent assets
16. The process of allocating the cost of intangible long-term assets having a finite useful life to accounting periods; the allocation of the amount of a bond premium or discount to the periods remaining until bond maturity.
Amortization
Leverage
Leading
Held-for-trading securities (trading securities)
17. A measure of the expected annual cash flow from the operation of a real estate investment after all expenses but before taxes.
Payment date
Economies of scale
Before-tax cash flow
Random number generator
18. A perpetual annuity - or a set of never-ending level sequential cash flows - with the first cash flow occurring one period from now.
Perpetuity
Free cash flow to equity model
Other receivables
Probability density function
19. A model that specifies an asset's intrinsic value.
Coefficient of variation (CV)
Absolute valuation model
Face value (also principal - par value - stated value - or maturity value)
Nondeliverable forwards (NDFs)
20. Regulation that seeks to keep the rate of return in the industry at a com-petitive level by not allowing excessive prices to be charged.
Present value of growth opportunities (or value of growth)
Sample standard deviation
Current taxes payable
Rate-of-return regulation
21. A range that has a given proba-bility that it will contain the population parameter it is intended to estimate.
Mutually exclusive projects
Cost of goods sold
Confidence interval
Vertical analysis
22. Shares that were issued and subse-quently repurchased by the company.
Declaration date
Sample variance
Winsorized mean
Treasury shares
23. The market in which the currency of one country is exchanged for the cur-rency of another.
Per unit contribution margin
Foreign exchange market
Performance guarantee
Gamma
24. When settling a contract - the risk that one party could be in the process of paying the counterparty while the counterparty is declar-ing bankruptcy.
Standardized unexpected earnings (SUE)
Nominal risk-free interest rate
Hedging
Settlement risk
25. The arithmetic mean value of a population; the arithmetic mean of all the obser-vations or values in the population.
Population mean
Her rmdahl-
Screening
Beta
26. The error of not rejecting a false null hypothesis.
Type II error
London Interbank Offer Rate (LIBOR)
Special purpose entity (special purpose vehicle or variable interest entity)
Market efficiency
27. A transaction whereby the target company management team converts the target to a privately held company by using heavy borrowing to finance the purchase of the target company's outstanding shares.
Leveraged buyout (LBO)
Binomial tree
Exit price
Asset-based valuation
28. PIE (or forward PIE or prospective PIE) A stock's current price divided by the next year's expected earnings.
Leading
Bond option
Regulatory risk
Residual autocorrelations
29. 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
Cyclical businesses
Income tax recoverable
Position trader
30. Uncorrelated; at a right angle.
Catalyst
Percentage-of-completion
Direct f'mancing lease
Orthogonal
31. The buyer of a derivative contract. Also refers to the position of owning a derivative.
Reviewed fmancial statements
Long
Correlation
Rejection point (or critical value)
32. A graphical depic-tion of a company's investment opportunities ordered from highest to lowest expected return. A company's optimal capital budget is found where the investment opportunity schedule inter-sects with the company's marginal cost of capit
Underlying
Investment opportunity schedule
Net revenue
White-corrected standard errors
33. An interest rate swap in which the notional principal is indexed to the level of interest rates and declines with the level ofinterest rates according to a predefined schedule. This type of swap is frequently used to hedge secu-rities that are prepai
Bond-equivalent yield
Index amortizing swap
Balance-sheet-based accruals ratio
Working capital management
34. A test for conditional het-eroskedasticity in the error term of a regression.
Breusch-Pagan test
Working capital
Static trade-off theory of capital structure
Leveraged floating-rate note or leveraged floater
35. An acquisition in which the acquirer gives the target company's shareholders some combination of cash and securities in exchange for shares of the target company's stock.
Accumulated benefit obligation
Stock purchase
Lack of marketability discount
No-growth company
36. The cash flow that is real-ized because of a decision; the changes or incre-ments to cash flows resulting from a decision or action.
Sample statistic or statistic
Put-call-forward parity
Greenmail
Incremental cash flow
37. An option in which the underlying is a stock index.
Index option
Population
Liquidity discount
Minimum-variance portfolio
38. Analysts who work at brokerages.
Market risk premium
After-tax cash flow (ATCF)
Probability function
Sell-side analysts
39. Describes a time series whenits expected value and variance are cons tan t andfinite in all periods and when its covariance withitself for a fixed number of periods in the past orfuture is constant and finite in all periods.
Surprise
Tender offer
Covariance stationary
Degree of operating leverage (DOL)
40. An intangible that can beacquired singly and is typically linked to specificrights or privileges having finite benefit periods(e.g. - a patent or trademark).
Compounding
Delta hedge
Butterfly spread
Identifiable intangible
41. A country that is lending more to the rest of the world than it is borrowing from it.
Leptokurtic
Net lender
Multiple linear regression model
Implied yield
42. The single-period interest rate for a completely risk-free security if no infla-tion were expected.
Negative serial correlation
Real risk-free interest rate
Expiration date
Fixed charge coverage
43. A series of call options on an interest rate - with each option expiring at the date on which the floating loan rate will be reset - and with each option having the same exercise rate. A cap in general can have an underlying other than an interest ra
Total asset turnover
Heteroskedasticity
Interest rate cap or cap
Fundamental beta
44. Costs that remain at the same level regardless of a company's level of production and sales.
Option price - option premium - or premium
Deductible temporary differences
Roy's safety first criterion
Fixed costs
45. A variation of a forward contract that has essentially the same basic definition but with some additional features - such as a clearing-house guarantee against credit losses - a daily settlement of gains and losses - and an organized electronic or fl
White-corrected standard errors
Justified (fundamental)
Present value of growth opportunities (or value of growth)
Futures contract
46. With respect to double-entry accounting - a credit records increases in liability - owners' equity - and revenue accounts or decreases in asset accounts; with respect to borrowing - the willing-ness and ability of the borrower to make promised paymen
Cost-of-service regulation
Captive rmance subsidiary
Credit
Constant maturity swap or
47. A probability drawing on per-sonal or subjective judgment.
Linear interpolation
Revaluation
Spread
Subjective probability
48. PIE PI Es based on normalized EPS data.
Normalized
Mean excess return
Revenue
Simple random sampling
49. A random variable for which the range of possible outcomes is the real line (all real numbers between (-00 and +(0) or some subset of the real line.
Proxy statement
Continuous random variable
Cost recovery method
Grouping by nature
50. Financial ratios involving bal-ance sheet items only.
Period costs
Future value (FV)
Balance sheet ratios
Poison puts