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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. The share price at a particular point in the future.
Imports
Giro system
Weighted-average cost of capital (WACC)
Terminal share price
2. The actual cash that would be avail-able to the company's investors after making all investments necessary to maintain the company as an ongoing en terprise (also referred to as free cash flow to the firm); the internally generated funds that can be
Exercise or exercising the option
Free cash flow
Present value model or discounted cash flow model
Derivatives dealers
3. The fixed price at which an option holder can buy or sell the underlying.
Accrued interest
Simulation
Exercise price (strike price - striking price - or strike)
Net income (loss)
4. An accelerated depre-ciation method - i.e. - one that allocates a relativelylarge proportion of the cost of an asset to the early years of the asset's useful life.
Dividends per share
Bonding costs
Frequency distribution
Diminishing balance method
5. An activity ratio equal to rev-enue divided by average receivables.
Long-lived assets (or long-term assets)
Normalized earnings per share (or normal earnings per share)
Operations risk or operational risk
Receivables turnover
6. A condition in the futures markets in which a transaction cannot take place because the price would be beyond the limits.
Per unit contribution margin
Sample skewness
Debt with warrants
Locked limit
7. A means of settling payments in which the amount owed by the first party to the second is netted with the amount owed by the sec-ond party to the first; only the net difference is paid.
Investment value
Gains
Elasticity
Payment netting
8. The annual return that an investor earns on a bond if the investor purchases the bond today and holds it until maturity.
Economic growth
Yield to maturity
Government sector surplus or deficit
Component cost of capital
9. 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.
Amortization
Principal
Nominal exchange rate
Conditional expected value
10. Not symmetrical.
Statement of changes in shareholders' equity (state-ment of owners' equity)
Leveraged recapitalization
Skewed
Operations risk or operational risk
11. An agreement allowing the lessee to use some asset for a period of time; essentially a rental.
Tangible book value per share
Operating lease
Time series
Generalized least squares
12. Describes a distribution with kurtosis identical to that of the normal distribution.
Cost of goods sold
Mesokurtic
Number of days of receivables
Guideline public company method
13. European option An option contract that can only be exercised on its expiration date.
European-style option or
Solvency
Tender offer
Equilibrium
14. 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)
Clean surplus accounting
Pure factor portfolio
Time value of money
15. A third party that is sough t out bX the tar-get c0mpany's board to Burchase a substantial minority stake in the target-enough to block a hostile takeover without selling the entire company.
Outliers
Direct format (direct method)
Normal backwardation
White sqnire
16. The costs of holding an asset - generally a function of the physical char-acteristics of the underlying asset.
Exercise rate or strike rate
Storage costs or carrying costs
Tracking portfolio
Factor sensitivity (also factor betas or factor loadings)
17. The risk associated with the conversion of foreign financial statements into domestic currency.
Current rate method
Translation exposure
Liquidity ratios
Receiver swaption
18. With respect to financial statement analy-sis - the ability of a company to fulfill its long-term obligations.
Solvency
Dirty surplus items
Futures commission merchants (FCMs)
Offsetting
19. Analysts who work at brokerages.
Present value (PV)
Screening
Sell-side analysts
Breakup value or private market value
20. A combination of interest rate put options designed to hedge a lender against lower rates on a floating-rate loan.
Nonmonetary assets and liabilities
Asset beta
Joint probability
Floor
21. The value to a specific buyer - tak-ing account of potential synergies based on the investor's requirements and expectations.
Total invested capital
Cross-product netting
Net liability balance sheet exposure
Investment value
22. 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.
Population standard deviation
Free cash flow hypothesis
Upstream
Expenses
23. A form of restructuring that involves the creation of a new legal entity and the sale of equity in it to outsiders.
Equity carve-out
Active risk squared
Leptokurtic
Asset-based approach
24. An extra return that compen-sates investors for the risk of loss relative to an investment's fair value if the investment needs to be converted to cash quickly.
Liquidity premium
Discrintinant analysis
Projected unit credit method
Dirty surplus accounting
25. 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
Target company - or target
Theory of contestable markets
Netting
Minimum-variance portfolio
26. An ordered listing.
Linear regression
Delta
Permutation
Income tax recoverable
27. With reference to regression - the set of variables included in the regression and the regression equation's functional form.
Model specification
Operating lease
U.S. interest rate differential
Weighted average cost method
28. The portion of the dependent variable that is not explained by the independent vari-able(s) in the regression.
Relative frequency
Error term
Top-down analysis
Equity
29. Huidity When receipts lag - creating pres-sure fmm the decreased available funds.
Look-ahead bias
Price limits
Giro system
Drag on li
30. An option in which the underlying is a bond; primarily traded in over-the-counter markets.
Multivariate normal distribution
Unit root
Trade-weighted index
Bond option
31. Any test (or procedure) concerned with parameters or whose validity depends on assumptions concerning the population generat-ing the sample.
Parametric test
Definitive merger agreement
Simulation trial
Going-concern assumption
32. The condition in futures markets in which futures prices are higher than expected spot prices.
Sample kurtosis
LIFO method
Multiplication rule for probabilities
Normal contango
33. An international organi-zation that places greater obligations on its mem-ber countries to observe the GATT rules.
Exercise rate or strike rate
U.S. interest rate differential
Dumping
World Trade Organization
34. A type of finance lease - from a lessor perspective - where the present value of the lease payments (lease receivable) exceeds the carrying value of the leased asset. The revenues earned by the lessor are operating (the profit on the sale) and financ
Discrintinant analysis
Return on total capital
Independent and identically distributed (l
Sales-type lease
35. Approach to trans-lating foreign currency financial statements for consolidation in which monetary assets and liabil-ities are translated at the current exchange rate. Nonmonetary assets and liabilities are translated at historical exchange rates (th
Monetary/nonmonetary method
Acquiring company - or acquirer
Managerialism theories
Capped swap
36. A decision rule for choos-ing between two investments based on their means and variances.
Clean surplus accounting
Defined-contribution pension plans
Markowitz decision rule
Credit derivatives
37. Arrangements that do not result in additional liabilities on the balance sheet but nonetheless create economic obligations.
Split-off
Off-balance sheet imancing
Continuous random variable
Prepaid expense
38. The slope of the capital market line - indicating the market risk premium for each unit of market risk.
Market price of risk
Going-concern assumption
Degrees of freedom (df)
Net operating assets
39. As used in this book - the use of a spreadsheet in executing a dividend discount model valuation - or other present value model valuation.
Comparative advantage
Spreadsheet modeling
Bond-equivalent basis
Common-size analysis
40. The intercept and slope coefficient(s) of a regression.
Regression coefficients
Production-flexibility
Exercise rate or strike rate
Efficiency
41. The sum of the observations divided by the number of observations.
Agency costs of equity
Arithmetic mean
Breakeven point
Interquartile range
42. A method for estimating a company's before-tax cost of debt based upon the yield on comparably rated bonds for maturities that closely match that of the company's existing debt.
Model risk
Debt rating approach
Compounding
Discrete time
43. The statistical measure that indicates the peakedness of a distribution.
Free cash flow to the
Defensive interval ratio
Kurtosis
Commodity swap
44. 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
Days of sales outstanding (DSO)
Bank discount basis
Bottom-up analysis
Current credit risk
45. A measurement scale that categorizes data but does not rank them.
Continuing residual income
Cash flow at risk (CFAR)
Permutation
Nominal scale
46. The sum of the sample observations - divided by the sampfe size.
Covariance
Credit-linked notes
Sample mean
Lower bound
47. The price paid to buy an asset.
Weighted mean
Entry price
Defined-benefit pension plans
Interest rate collar
48. A merger involving companies at different positions of the same production chain; for example - a supplier or a distributor.
Tracking portfolio
One third rule
Vertical merger
Sinking fund factor
49. A European-style option with a value at maturity equal to the difference between the stock price at maturity and the average stock price during the life of the option - or $0 - whichever is greater.
Sarbanes-Oxley Act
Asian call option
Poison pill
Dutch Book theorem
50. A company that has similar business risk; usually in the same industry and preferably with a single line of business.
omparable company
Growth investors
Asset retirement obligations (AROs)
Sector neutral