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Test your basic knowledge |
CFA Level2 Vocab
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Study First
Subjects
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
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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. As an approach to valuing a company - the sum of the value of the company - assuming no use of debt - and the net present value of any effects of debt on company value.
Holding period yield (HPy)
Technical indicators
Acquisition method
Adjusted present value (APV)
2. Small numbers of observations at either extreme (small or large) ofa sample.
Differential expectations
Outliers
Investment value
Total return swap
3. A depreciation method that allocates evenly the cost of a long-lived asset less its estimated residual value over the estimated useful life of the asset.
Tie-in sales
Intergenerational data mining
Histogram
Straight-line method
4. The fixed rate at which the holder of an interest rate option can buy or sell the underlying.
Exercise rate or strike rate
Cap
Leptokurtic
Cost of equity
5. Total assets minus total liabilities.
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6. The risk associated with operating earnings. Operating earnings are uncertain because total revenues and many of the expendi-tures contributed to produce those revenues are uncertain.
Cash
Receivables turnover
Active factor risk
Business risk
7. A commercial imple-mentation of the residual income concept; the computation of EVA® is the net operating profit after taxes minus the cost of capital - where these inputs are adjusted for a number of items.
Economic value added (EVA)
Balance sheet (statement of fmandal position or state-ment of fmandal condition)
Earnings per share
Direct format (direct method)
8. The sensitivity of the option price to the risk-free rate.
Rho
Financial analysis
Stated rate (nominal rate or coupon rate)
Method of comparables
9. 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
Materiality
Trend
Economic sectors
Futures contract
10. With respect to the format of the income statement - a format that presents a subtotal for gross profit (revenue minus cost of goods sold).
Proxy statement
Breakup value or private market value
Buy-side analysts
Multi-step format
11. With respect to revenue recognition - a method that s ecifies that the portion of the total profit of the sale that . s recognized in each pe riod is deter-mined by the percentage of the total sales price for which the seller has received cash.
Installment method (installment-sales method)
Accounting estimates
Free cash flow
Cost-of-service regulation
12. Behavior on the part of a firm that allows it to comply with the letter of the law but violate the spirit - significantly lessening the law's effects.
Interest rate floor or floor
Creative response
Structured note
Government sector surplus or deficit
13. With reference to assets - the amount of cash or cash equivalents that would have to be paid to buy the same or an equivalent asset today; with reference to liabilities - the un discounted amount of cash or cash equivalents that would be required to
Current cost
Liquidity
Enhanced derivatives products companies (EDPC)
Multiplication rule for probabilities
14. A probability based on logical analysis rather than on observation or personal judgment.
Subjective probability
Bond indentnre
A priori probability
Spread
15. Observations on characteristic(s) of the same observational unit through time.
Degree of total leverage
Longitudinal data
Mixed factor models
Foreign currency
16. The process of identifYing the level of risk an entity wants - measuring the level of risk the entity currently has - taking actions that bring the actual level of risk to the desired level of risk - and monitoring the new actual level of risk so tha
Diluted earnings per share (diluted
Bond-equivalent basis
Population variance
Risk management
17. Valuation indi-cators that compare a stock's performance during a period either to its own past performance or to the performance of some group of stocks.
Opportunity set
Relative strength (RSTR) indicators
Sampling error
Free cash flow to equity model
18. The property of having a constantvariance; refers to an error term that is constantacross observations.
Homoskedasticity
Bear hug
Underlying
Grant date
19. The value of a company if the com-pany were dissolved and its assets sold individually.
Laddering strategy
Dummy variable
Liquidation value
Settlement risk
20. An option strategy in which a position in an asset is converted to a risk-free position with a position in a specific number of options. The number of options per unit of the underlying changes through time - and the position must be revised to maint
Illiquidity discount
Population mean
Delta hedge
Binomial model
21. A variation of the monetary/ nonmonetary translation method that requires not only monetary assets and liabilities - but also nonmonetary assets and liabilities that are mea-sured at their current value on the balance sheet date to be translated at t
Payoff
Degree of confidence
Temporal method
Degree of total leverage
22. Method used to estimate the overall capitalization rate by dividing the sale price of a comparable income property into the net operating income.
Market-extraction method
Liquidity premium
Accelerated methods of depreciation
Economic order quantity-reorder point
23. A method for determining the required rate of return on equity as the sum ofrisk premiums - in which one or more of the risk premiums is typically subjective rather than grounded in a formal equilibrium model.
Absolute valuation model
Liquidation value
Normal distribution
Build-up method
24. A variation of a floating-rate note that has some type of unusual characteristic such as a leverage factor or in which the rate moves opposite to interest rates.
Structured note
Agency costs of equity
Adjusted present value (APV)
Cost structure
25. A swaption that allows the holder to enter into a swap as the fixed-rate receiver and floating-rate payer.
Conditional variances
Pairs arbitrage
Receiver swaption
Trade receivables (commercial receivables or accounts receivable)
26. Regulation that allowsprices to reflect only the actual average cost ofproduction and no monopoly profits.
Dirty surplus accounting
Currency swap
Tax expense
Cost-of-service regulation
27. A type of interest rate swap in which the floating payment is set at the end of the period and the interest is paid at that same time.
Arrears swap
Trading securities (held-for-trading securities)
Monitoring costs
Capital rationing
28. The price received to sell an asset or trans-fer a liability.
Investment constraints
Exit price
Bonding costs
General Agreement on Tariffs and Trade
29. An offset to revenue reflecting any cash refunds - credits on account - and discounts from sales prices given to cus-tomers who purchased defective or unsatisfactory items.
One third rule
Liquidity ratios
Present (price) value of a basis point (PVBP)
Sales returns and allowances
30. A country that during its entire his-tory has invested more in the rest of the world than other countries have invested in it.
Dividend rate
Vega
Creditor nation
Legislative and regulatory risk
31. A measure of dispersion relat-ing to a population - calculated as the mean of the squared deviations around the population mean.
Abandonment option
Inverse floater
Population variance
Zero-cost collar
32. The use of computer networks to conduct financial transactions electronically.
Electronic funds transfer
Ordinary least squares (OLS)
Degree of confidence
Rate-of-return regulation
33. Events such that only one can occur at a time.
Mutually exclusive events
Asset-based approach
Horizontal common-size analysis
Maturity premium
34. Ratio of sales on credit to the average balance in accounts receivable.
Accounts receivable turnover
Multiplication rule for probabilities
Reporting unit
Forward swap
35. 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.
Money-weighted rate of return
Conversion factor
Liquidity premium
Covariance stationary
36. Valuation approach that values an asset as the present discounted value of the income expected from it.
Build-up method
Purchasing power gain
Income approach
Financial transaction
37. FIrm The cash flow available to the company's suppliers of capital after all operat-ing expenses (including taxes) have been paid and necessary investments in working and fixed capital have been made.
Purchased in-process research and development costs
Outliers
Free cash flow to the
Double-entry accounting
38. A gain in value caused bychanges in price levels. Monetary liabilities expe-rience purchasing power gains during periods ofinflation.
Cost averaging
Purchasing power gain
Mean absolute deviation
Ex-dividend
39. A breakdown of accounts into cate-gories of days outstanding.
Aging schedule
Outcome
Factor
Losses
40. The analyst'S estimate of a stock's value at a particular point in the future .
Terminal value of the stock (or continuing value of the stock)
Defined-benefit pension plans
Economic exposure
Impairment
41. The accuracy with which a company's reported financials reflect its operat-ing performance and their usefulness for forecast-ing future cash flows.
Financial reporting quality
Dirty surplus accounting
Statement of cash flows (cash flow statement)
Acquiring company - or acquirer
42. The unlevered beta; reflects the business risk of the assets; the asset's systematic risk.
Enterprise risk management
Tariff
Asset beta
Historical cost
43. Options that are far in-the-money.
Transaction exposure
Deep in the money
Mature growth rate
Cost of goods sold
44. The expected total e b urn on an asset over a stated olding period; for stocks - the sum of tne expected dividend yield and the expected price appreciation over the holding period.
Exp ected holding-period return
Quartiles
Capital market line (CML)
Factor sensitivity (also factor betas or factor loadings)
45. The combination of the underlying - puts - calls - and risk-free bonds that replicates a forward contract.
Cumulative relative frequency
Grouping by nature
Synthetic forward contract
Stock-out losses
46. An extra return that compen-sates investors for expected inflation.
Inflation premium
Reputational risk
Cash flow at risk (CFAR)
Exercise rate or strike rate
47. Diminishment in value as a result of car-rying (book) value exceeding fair value and/or recoverable value.
Specific identification method
Impairment
Macaulay duration
Leptokurtic
48. The potential for asymmetric information to bring about a general decline in product quality in an industry.
Cross-product netting
Floored swap
Momentum indicators
Lemons problem
49. Investments in which investors exert significant influence - but not con-trol - over the investee. Typically - the investor has 20 to 50 % ownership in the investee.
Finance lease (capital lease)
Parameter
Economic growth rate
Minority active investments
50. A dividend payout pol-icy under which earnings in excess of the funds necessary to finance the equity portion of com-pany's capital budget are paid out in dividends.
Internal rate of return (IRR)
Degree of operating leverage (DOL)
Residual dividend approach
Variance