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Test your basic knowledge |
CFA Level2 Vocab
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Instructions:
Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
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1. 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.
Annuity due
Unlimited funds
Monte
Inverse price ratio
2. The mix of a company's variable costsand fixed costs.
Statutory merger
Cost structure
Float factor
Commodity futures
3. The assumption of equal priorprobabilities.
Amortizing and accreting swaps
Diffuse prior
Realizable value (settlement value)
Equity method
4. 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.
Block
Gross income multiplier (GIM)
At the money
Discount for lack of control
5. Current market w ice divided by the most recent quarterly per-share dividend multiplied by four.
Noncurrent
Trailirig dividend yield
Deep in the money
Robust standard errors
6. 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
Residual income method (or excess earnings method)
Error autocorrelation
Central limit theorem
Gamma
7. A measure of VAR equivalentto the analytical method bu t that refers to the use of delta to estimate the option's price sensitivity.
Retail method
Residual loss
American option
Delta-normal method
8. The unsold units of product on hand.
Holding period return
Inventory
Net present value (NPV)
Cash o£ fering
9. A function giving the probability that a random variable is less than or equal to a specified value.
Bottom-up investing
Cumulative distribution function
Warehouse receipt arrangement
Fixed charge coverage
10. The combination of puts - the underly-ing - and risk-free bonds that replicates a call option.
Economic value added (EVA)
Null hypothesis
Synthetic call
Money market
11. Describes a distribution that is less peaked than the normal distribution.
Conversion factor
Platykurtic
Safety-first Rules
Other comprehensive income
12. Aka 'Residual income.'
Abnormal earnings
Tracking error
Projected benefit obligation
Credit
13. Aka 'Residual income. '
Discount
Economic profit
Current ratio
Trade credit
14. Depreciatiolil methods that allocate a relatively large proportion of the cost of an asset to the early years of the asset's useful life.
Accelerated methods of depreciation
Offsetting
Friendly transaction
Leveraged recapitalization
15. Generally - a synonym for revenue; 'sales' is generally understood to refer to the sale of goods - whereas 'revenue' is understood to include the sale of goods or services.
Sales
Direct sales-comparison approach
Recapture premium
Strangle
16. The process by which options and other derivatives are priced by treating investors as though they were risk neutral.
Risk-neutral valuation
Autoregressive (AR) model
LIFO layer liquidation (LIFO liquidation)
Takeover premium
17. The system of principles - policies - procedures - and clearly defined responsi-bilities and accountabilities used by stakeholders to overcome the conflicts of interest inherent in the corporate form.
Weighted harmonic mean
Common-size analysis
Corporate governance
Floor
18. 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.
Basic earnings per share (EPS)
Minority interest (noncontrolling interest)
Break point
Trade-weighted index
19. A function with non-negative values such that probability can be described by areas under the curve graphing the function.
Future value (FV)
Monitoring costs
Quantile (or fractile)
Probability density function
20. A measurement scale that sorts data into categories that are ordered (ranked) with respect to some characteristic.
Bootstrapping earnings
Monetary/nonmonetary method
Ordinal scale
Sell-side analysts
21. Very liquid short-tenn investments - usually maturing in 90 days or less.
Sole proprietorship
Cost of goods sold
Cash equivalents
Normal contango
22. Controlling additional property throughreinvestment - refinancing - and exchanging.
Pyramiding
Gross domestic product
White sqnire
Completed contract
23. The positive square root of the variance; a measure of dispersion in the same units as the original data.
Unearned fees
Capital market line (CML)
Independent and identically distributed (l
Standard deviation
24. With reference to investmentselection processes - an approach that involves selection from all securities within a specified investment universe - i.e. - without prior narrowiNg of the universe on the bas' s of macroeconomj c or overall market consid
Bottom-up analysis
Equitizing cash
Ratio spread
Conditional heteroskedasticity
25. An option in which the holder has the right to make an unknown interest payment and receive a known interest payment.
Local currency
Interest rate put
Purchasing power gain
Dividend payout ratio
26. The evaluation of credit risk; the evaluation of the creditworthiness of a borrower o r counterpar ty.
LIFO reserve
Simulation trial
Ex-dividend
Credit analysis
27. A subset of a larger popula-tion created in such a way that each element of the population has an equal probability of being selected to the subset.
Minimum-variance frontier
Simple random sample
Dividends per share
Multi-step format
28. Debt issued with warrants that give the bondholder the right to purchase equity at prespecified terms.
Comparables (comps - guideline assets - guideline com-panies)
Stock-out losses
Accounting risk
Debt with warrants
29. Income rate that reflects the relationship between equity income and equity capital.
Catalyst
Unidentifiable intangible
Mixed factor models
Equity dividend rate
30. A wholly-owned sub-sidiary of a company that is established to provide financing of the sales of the parent company.
Going-concern assumption
Captive rmance subsidiary
Earnings yield
Credit
31. A portfolio offering the highest expected return for a given level of risk as mea-sured by variance or standard deviation of return.
Company fundamental factors
Statement of cash flows (cash flow statement)
Efficient portfolio
Sole proprietorship
32. Total assets minus total liabilities.
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33. An adjustment used to facilitate delivery on bond futures contracts in which any of a number of bonds with different characteristics are eligible for delivery.
Conversion factor
Corporate raider
Robust
Fixed charge coverage
34. An Activity ratio calculated as total revenue divided by average net fixed assets.
Credit swap
Implied volatility
Interest coverage
Fixed asset turnover
35. 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) .
Normalized earnings per share (or normal earnings per share)
Spin-off
Fiduciary call
Financial transaction
36. An estimate of the country spread (country equity premium) for a develop-ing nation that is based on a comparison of bonds yields in country being analyzed and a developed country. The sovereign yield spread is the differ-ence between a government bo
Target capital structure
Sovereign yield spread
Bear spread
Taxable income
37. The value derived using a sum-of-the-parts valuation.
Top-down analysis
Breakup value or private market value
Disbursement float
Percentiles
38. 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.
Economic profit
Degree of financial leverage (DFL)
Storage costs or carrying costs
Interest rate option
39. The excess of assets over liabilities; the residual interest of shareholders in the assets of an entity after deducting the entity's liabilities.
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40. An approach to portfolio analysis using expected means - variances - and covariances of asset returns.
Debt covenants
Performance measurement
Mean-variance analysis
Owners' equity
41. A legal entity with rights similar to those of a person. The chief officers - executives - or top managers act as agents for the firm and are legally entitled to authorize corporate activi-ties and to enter into contracts on behalf of the business.
Comparative advantage
Fiduciary call
Corporation
Homoskedasticity
42. A number between 0 and 1 describing the chance that a stated event will occur.
Transaction exposure
Compiled f'mancial statements
Margin
Probability
43. Assets that can be most readily con-verted to cash (e.g. - cash - short-term marketable investments - receivables) .
Investment constraints
Basic earnings per share (EPS)
Quick assets
Tax base (tax basis)
44. The income tax owed by the company on the basis of taxable income.
Deductible temporary differences
Sinking fund factor
Income tax payable
Yield to maturity
45. A swap in which one party agrees to pay the total return on a security. Often used as a credit derivative - in which the underlying is a bond.
Receiver swaption
Dirty surplus items
Total return swap
Pretax margin
46. The use of fixed costs in operations.
Population
Operating leverage
Measure of location
Discrete time
47. Aka Harmonic mean.
Weighted harmonic mean
Quick assets
Sample statistic or statistic
Long-term contract
48. The price multiple for a stock assumed to hold at a stated future time.
Free cash flow to equity
Credit derivatives
Terminal price multiple
Bootstrapping earnings
49. EPS) Netincome - minus preferred dividends - divided bythe number of common shares outstanding con-sidering all dilutive securities (e.g. - convertibledebt and options); the EPS that would result if alldilutive securities were converted into commonsh
Real options
Contingent consideration
Committed lines of credit
Diluted earnings per share (diluted
50. A portfolio having factor sensitiv-ities that are matched to those of a benchmark or other portfolio.
Price-setting option
Tracking portfolio
Contingent consideration
Definition of value (or standard of value)
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