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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 option on the yield spread on a bond.
Credit spread option
Company share-related factors
Grouping by function
Risk premium
2. A forward contract in which the underlying is a foreign currency.
Continuously compounded return
Currency forward
Settlement risk
Nominal risk-free interest rate
3. 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
Discrete random variable
Operating return on assets (operating
Robust standard errors
Asset-based approach
4. An activity ratio calculated as purchases divided by average trade payables.
Payables turnover
Robust
Net asset balance sheet exposure
No-growth company
5. The number of observations in a given interval (for grouped data) .
Absolute frequency
Autocorrelation
Bill-and-hold basis
Regulatory risk
6. A widely used approach to estimate an overall capitalization rate. It is based on the premise that debt and equity financ-ing is typically involved in a real estate transaction.
Lower bound
Discount for lack of control
Hedging
Band-of-investment method
7. A swap in which the floating payments have an upper limit.
Capped swap
Flip-in pill
Treasury stock method
Subsistence real wage rate
8. The cost to a com pany of issu-ing preferred stock; the dividend yield that a com-pany must commit to pay preferred stockholders.
Cost of preferred stock
Negative serial correlation
Return on invested capital (ROIC)
Simple random sample
9. The rule that - on the average - with no change in technology - a 1 percent increase in capital per hour of labor brings a 1/3 percent increase in labor productivity.
Convenience yield
One third rule
Relative strength (RSTR) indicators
Pyramiding
10. Attempts by management to encourage analysts to forecast a slightly lower number for expected earnings than the analysts would otherwise forecast.
Earnings expectation management
Residual loss
Cyclical businesses
Binomial model
11. The combination of calls - the underly-ing - and risk-free bonds that replicates a put option.
Labor productivity
Strap
U.S. GAAP and uniting of interests under IFRS
Synthetic put
12. Agreements made by a company in bankruptcy under which a company's capital struc-ture is altered and/ or alternative arrangements are made for debt repayment; U.S. Chapter II bankruptcy. The company emerges from bank-ruptcyas a going concern.
Cap
Platykurtic
Reorganization
Systematic sampling
13. The quoted interest rate per period; the stated annual interest rate divided by the number of compounding periods per year.
Capital structure
Periodic rate
Autocorrelation
Exercise or exercising the option
14. A permissible delivery procedure used by futures market participants - in which the long and short arrange a delivery pro-cedure other than the normal procedures stipu-lated by the futures exchange.
Cost leadership
Liquidity premium
Build-up method
Exchange for physicals (EFP)
15. A floating-rate note or bond in which the coupon is adjusted at a multiple of a benchmark interest rate.
Unconditional heteroskedasticity
Financial futures
Leveraged floating-rate note or leveraged floater
Asian call option
16. A strategic corporate goal repre-senting the long-term proportion of earnings that the company intends to distribute to shareholders as dividends.
Measurement scales
Target payout ratio
Interest rate parity
Contingent clain
17. The income tax owed by the company on the basis of taxable income.
Income tax payable
Impairment
Root mean square(l er ror (RMSE)
Comparables (comps - guideline assets - guideline com-panies)
18. An inventory accounting method in which the sales value of an item is reduced by the gross margin to calculate the item's cost.
Cost of debt
Principal
Retail method
Credit spread option
19. An international organi-zation that places greater obligations on its mem-ber countries to observe the GATT rules.
Direct f'mancing lease
Statistically significant
Bottom-up forecasting approach
World Trade Organization
20. An exchange rate pegged at a value decided by the government or central bank and that blocks the unregulated forces of demand and supply by direct intervention in the foreign exchange market.
Multivariate distribution
Fixed exchange rate
Beta
Asian call option
21. 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.
Active strategy
Unconditional heteroskedasticity
Transaction exposure
Cash flow statement (statement of cash flows)
22. The sale - liquidation - or spin-off of a d'vi-sion or subsidiary.
Yield
Divestiture
Sum-of-the-parts valuation
Tracking error
23. The condition in futures markets in which futures prices are higher than expected spot prices.
Normalized
Normal contango
Chain rule of forecasting
Proxy fight
24. A model of stock val-uation that views a stock's intrinsic value as the present value of expected future free cash flows to equity.
Free cash flow to equity model
Futures commission merchants (FCMs)
In-sample forecast errors
Cost structure
25. Common-size analysis using only one reporting period or one base financial state-ment; fo r example - an income statement in which all items are stated as percentages of sales.
Vertical analysis
Divestiture
Reviewed fmancial statements
Cost of debt
26. The estimated fair value of the price multiple - usually based on fore-casted fundamentals or comparables.
Justified price multiple (or warranted price multiple or intrinsic price multiple)
Tree diagram
Objective probabilities
Momentum indicators
27. A balance sheet asset that arises when an excess amount is paid for income taxes relative to accounting profit. The taxable income is higher than accounting profit and income tax payable exceeds tax expense. The company expects to recove r the differ
Asset purchase
Measurement scales
Deferred tax assets
Geometric mean
28. The average squared deviation below a target value.
Target semivariance
Fundamentals
In-process research and development
Economic growth
29. A form of centralized risk management that typically encompasses the man-agement of a broad variety of risks - ind uding insuran -ce risk.
Population standard deviation
Enterprise risk management
Managerialism theories
Assets
30. The present discounted value of future cash flows: For assets - the present dis-counted value of the future net cash inflows that the asset is expected to generate; for liabilities - the present discounted value of the future net cash outflows that a
Present value (PV)
Paired comparisons test
Agency relationships
Value at risk (VAR)
31. The probabili ty that a confi-dence interval ind udes the unknown population parameter.
Degree of confidence
Cash flow from operations (cash flow from operating activities or operating cash flow)
Ope ating profit margin (operating margin)
Legislative and regulatory risk
32. Observations of a variable over time.
Seats
Long-term equity anticipatory securities (LEAPS)
Discrintinant analysis
Time-series data
33. A sample measure of the degree of a distribution's peakedness in excess of the normal distribution's peakedness.
Capital structure
Covariance stationary
Tie-in sales
Sample excess kurtosis
34. A condition in the futures markets in which the price at which a transaction would be made is at or beyond the price limits.
Assets
Liruit move
Cost of goods sold
Flip-over pill
35. A series of put 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 floor in general can have an underlying other than the interest
Target capital structure
Enterprise value multiple
Weighted-average cost of capital (WACC)
Interest rate floor or floor
36. The positive square root of the sample variance.
Sample standard deviation
Adjusted beta
Logit model
Antidilutive
37. A probability drawing on per-sonal or subjective judgment.
Subjective probability
Credit swap
Blockage factor
Standard cost
38. The differ-ence between net operating assets at the end and the beginning of the period.
Semilogarithmic
Long-lived assets (or long-term assets)
Balance-sheet-based aggregate accruals
Impairment
39. Above average or abnormally high growth rate in earnings per share.
Supernormal growth
Manufacturing resource planning (MRP)
Asian call option
Cumulative distribution function
40. An intangible that cannot be acquired singly and that typically possesses an indefinite benefit period; an example is account-ing goodwill.
Unidentifiable intangible
Cnsistent
Bear spread
One-sided hypothesis test (or one-tailed hypothesis test)
41. A merger in which the company being purchased becomes a subsidiary of the purchaser.
Subsidiary merger
Liruit move
Offsetting
Double taxation
42. The rate of return required by suppliers of capital for an individual source of a company's funding - such as debt or equity.
Stated annual interest rate or quoted interest rate
Dutch Book theorem
Eurodollar
Component cost of capital
43. Forecasted dividends per share over the next year divided by current stock price.
Bank discount basis
Parametric test
Guideline transactions method
Leading dividend yield
44. A measure of the co-movement (linearassociation) between two random variables.
Reporting unit
Covariance
Trust receipt arrangement
Default risk premium
45. The owners of a joint venture. Each is active in the management and shares control of the joint venture.
Venturers
Net profit margin (profit margin or return on sales)
Multiple linear regression
Synthetic index fund
46. Segment profit (loss) divided by segment revenue.
Value
Segment margin
Portfolio possibilities curve
Dividend discount model (DDM)
47. The stage of growth between the growth phase and the mature phase of a company in which earnings growth typically slows.
Net revenue
Optimal capital structure
Payout ratio
Transition phase
48. A loss in value caused bychanges in price levels. Monetary assets experi-ence purchasing power losses during periods ofinflation.
Revenue
Current taxes payable
Electronic funds transfer
Purchasing power loss
49. An approach to portfolio analysis using expected means - variances - and covariances of asset returns.
Mean-variance analysis
Vertical analysis
Acquisition method
Down transition probability
50. (Aka forward rate agreement)
Vertical merger
Interest rate forward
Initial margin requirement
Dirty surplus accounting