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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. 1) A contract on an interest rate - whereby at periodic payment dates - the writer of the cap pays the difference between the market interest rate and a specified cap rate if - and only if - this differ-ence is positive. This is equivalent to a strea






2. Shares that were issued and subse-quently repurchased by the company.






3. An option that gives the holder the right to buy an underlying asset from another party at a fixed price over a specific period of time.






4. 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






5. The fair value of the estimated costs to be incurred at the end of a tangible asset's service life. The fair value of the liability is determined on the basis of discounted cash flows.






6. The amount of income earned during a period per share of common stock.






7. The return on an asset in excess of the asset's required rate of return; the risk-adjusted return.






8. A yield on a basis comparable to the quoted yield on an interest-bearing money market instrument that pays interest on a 360-<iay basis; the annualized holding period yield - assuming a 360-<iay year.






9. A sample measure of the degree of a distribution's peakedness.






10. Present obligations of an enterprise aris-ing from past events - the settlement of which is expected to result in an outflow of resources embodying economic benefits; creditors' claims on the resources of a company.






11. Regression that models the straight-line relationship between the dependent and independen t variable (s) .






12. A si gle numerical estimate of an unknown quantity - such as a population parameter.






13. An algorithm that pro-duces uniformly distributed random numbers between 0 and 1.






14. Factors that affect the average returns of a large number of different assets.






15. A theory of economic growth based on the view that the growth of real GDP per person is temporary and that when it rises above subsistence level - a population explo-sion eventually brings it back to subsistence level.






16. The divisor in the expression for the value of a perpetuity.






17. The market price of an asset or lia-bility that trades regularly.






18. The average exchange rate - with individual currencies weighted by their importance in U.S. international trade.






19. 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






20. When liabilities translated at the current exchange rate are greater than assets translated at the current exchange rate. Liabilities exposed to translation gains or losses exceed the exposed assets.






21. An arrangement whereby a customer authorizes a debit to a demand account; typically used by companies to collect routine pay-ments for services.






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






23. The average squared deviation below the mean.






24. In probability - with reference to an event 5 - the event that 5 does not occur; in eco-nomics - a good that is used in conjunction with another good.






25. Activities which are associated with the acquisition and disposal of property - plant - and equipment; intangible assets; other long-term assets; and both long-term and short-term investments in the equity and debt (bonds and loans) issued by other c






26. An option in which the holder has the right to make an unknown interest payment and receive a known interest payment.






27. An increment or premium to value associated with a controlling ownership interest in a company.






28. The property of having a non-constant variance; refers to an error term with the property that its variance differs across observations.






29. The value of skills and knowledgepossessed by the workforce.






30. An extra return that compensates investors for the increased sensitivity of the mar-ket value of debt to a change in market interest rates as maturity is extended.






31. The principle that dol-lar amounts indexed at the same point in time are additive.






32. Income approach that values an asset based on estimates of future cash flows discounted to present value by using a discount rate reflective of the risks associated wi th the cash flows.






33. A procedure by which a population is divided into subpopulations (strata) based on one or more classification criteria. Sim-ple random samples are then drawn from each stratum in sizes proportional to the relative size of each stratum in the populati






34. An option in which the underlying is a bond; primarily traded in over-the-counter markets.






35. 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.






36. The standard deviation of the differ-ences between a portfolio's returns and its bench-mark's returns; a synonym of active risk.






37. Investigation and analysis in support of a recommendation; the failure to exercise due diligence may sometimes result in liability accord-ing to various securities laws.






38. A method for accounting for the effect of options (and warrants) on earnings per share (EPS) that specifies what EPS would have been if the options and warrants had been exercised and the company had used the pro-ceeds to repurchase common stock.






39. The estimation of an unknown value on the basis of two known values that bracket it - using a straight line between the two known values.






40. Describes a distribution that is more peaked than a normal distribution.






41. With reference to statistical infer-ence - the subdivision dealing with the testing ofhypotheses about one or more populations.






42. Any outcome or specified set of outcomes of a random variable.






43. The amount of funds originally invested in a project or instrument; the face value to be paid at maturity.






44. The rate of return required by suppliers of capital for an individual source of a company's funding - such as debt or equity.






45. 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.






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






47. The financial state-ment that presents an entity's current financial position by disclosing resources the entity con-trols (its assets) and the claims on those resources (its liabilities and equity claims) - as of a particular point in time (the date






48. The probability of the joint occur-rence of stated even ts.






49. A stage of growth in which a company typically enjoys rapidly expanding markets - high profit margins - and an abnormally high growth rate in earnings per share.






50. A hypothesis concern-ing pricing behavior that holds that even though there are only a few firms in an industry - they are forced to price their products more or less com-petitively because of the ease of entry by outsiders. The key aspect of a conte