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CFA Level2 Vocab

Subjects : certifications, cfa
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • 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. Heteroskedasticity in the error variance that is correlated with the values of the independent variable(s) in the regression.






2. Debt issued with warrants that give the bondholder the right to purchase equity at prespecified terms.






3. An arrangement whereby someone - an agent - acts on behalf of another per-son - the principal.






4. The risk that a financial instrument cannot be purchased or sold without a significant concession in price due to the size of the market.






5. A swap in which the underlying is an interest rate. Can be viewed as a currency swap in which both currencies are the same and can be created as a combination of currency swaps.






6. Unsecured short-term corporate debt that is characterized by a single payment at maturity.






7. A value against which a computed test statistic is compared to decide whether to reject or not reject the null hypothesis.






8. In the context of inventory management - the need for inventory as part of the routine production-sales cycle.






9. An account that offsets another account.






10. European option An option contract that can only be exercised on its expiration date.






11. An increase in a company's earnings that results as a consequence of the idio-syncrasies of a merger transaction itself rather than because of resulting economic benefits ofthe combination.






12. A distribution that specifies the probabilities for a single random variable.






13. The expansion of production pos-sibilities that results from capital accumulation and technological change.






14. A swap transaction in which at least one cash flow is tied to the return to an equity portfo-lio position - often an equity index.






15. The error of rejecting a true null hypothesis.






16. A company's ability to satisfY its short-term obligations using assets that are most readily con-verted into cash; the ability to trade a futures con-tract - either selling a previously purchased contract or purchasing a previously sold contract.






17. A contract signed by both parties to a merger that clarifies the details of the transaction - including the terms - war-ranties - conditions - termination details - and the rights of all parties.






18. Method used to estimate the overall capitalization rate by dividing the sale price of a comparable income property into the net operating income.






19. An approach to managing inve tory based on expected demand and the predictability of demand; the ordering point for new inventory is determined based on the costs of ordering and carrying inventory - such that the total cost associated with inventory






20. P/E calculated on the basis of a forecast of EPS; a stock's current price divided by next year's expected earnings.






21. The line with an inter-cept point equal to the risk-free rate that is tangent to the efficient frontier of risky assets; represents the efficient frontier when a risk-free asset is available for investment.






22. Any rate used in finding the present value of a future cash flow.






23. In the con-text of private company valuation - valuation model based on an assumption of a constant growth rate of free cash flow to the firm or a con-stant growth rate of free cash flow to equity.






24. Financial ratios measuring the com-pany's ability to meet its short-term obligations.






25. Correlation between adj acent observations in a time ser ies.






26. Also called present value of a basis point or price value of a basis point (PVBP) - the change in the bond price for a I basis point change in yield.






27. 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.






28. An approach to portfolio analysis using expected means - variances - and covariances of asset returns.






29. Arrangements that do not result in additional liabilities on the balance sheet but nonetheless create economic obligations.






30. A floating-rate note or bond in which the coupon is adjusted to move opposite to a benchmark interest rate.






31. The sum of the observations divided by the number of observations.






32. In a nonconventional cash flow pattern - the initial outflow is not fol-lowed by inflows only - but the cash flows can flip from positive (inflows) to negative (outflows) again (or even change signs several times).






33. The cost of borrowing expressed as a yearly rate.






34. Controlling additional property throughreinvestment - refinancing - and exchanging.






35. A money measure of the mini-mum value of losses expected during a specified time period at a given level of probability.






36. Earnings per share divided by price; the reciprocal of the PIE ratio.






37. An index fund position cre-ated by combining risk-free bonds and futures on the desired index.






38. The currency of the primary economic environment in which an entity operates.






39. The potential for asymmetric information to bring about a general decline in product quality in an industry.






40. Any departure of the market price of an asset from the asset's estimated intrinsic value.






41. Profits lost from not having suffi-cient inventory on hand to satisfy demand.






42. A forward contract in which the underlying is a bond.






43. An approach to trading that uses pairs of closely re ated stocks - buying the relatively undervalued stock and selling short the relatively overvalued stock.






44. A transaction between two affiliates - an investor company and an associate company such that the associate company records a profit on its income statement. An example is a sale of inven-tory by the associate to the investor company.






45. A level of inventory beyond anticipated needs that provides a cushion in the event that it takes longer to replenish inventory than expected or in the case of greater than expected demand.






46. An approach to decomposing return on investment - e.g. - return on equity - as the product of other financial ratios.






47. Assets that are expected to provide economic benefits over a future period of time - typically greater than one year.






48. The probability of an event estimated as a relative frequency of occurrence.






49. A contract in which the under-lying asset is oil - a precious metal - or some other commodity.






50. Stan-dard errors of the estimated parameters of a regression that correct for the presence of het-eroskedasticity in the regression's error term.







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