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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. The uncertainty associated with tax laws.
Currency option
VISibility
Tax risk
Time-weighted rate of return
2. Potential future payments to the seller that are contingent on the achieve-ment of certain agreed on occurrences.
Bull spread
Winsorized mean
Float
Contingent consideration
3. The mix of a company's variable costsand fixed costs.
Total return swap
Commodity forward
Defined benefit obligation
Cost structure
4. A public offer whereby the acquirer invites target shareholders to submit ('tender') their shares in return for the proposed payment.
Tender offer
Neoclassical growth theory
Simulation
Target balance
5. An option in which the underly-ing is an interest rate.
Balance-sheet-based accruals ratio
First-order serial correlation
Interest rate option
Look-ahead bias
6. A swap in which the underlying is a commodity such as oil - gold - or an agricultural product.
Cash
Commodity swap
Target payout ratio
Earnings management activity
7. The posi tive square root of tar-get semivar·ance.
Netting
Target semideviation
Aging schedule
Financial reporting quality
8. A person or organization seeking to profit by acquiring a company and reselling it - or seeking to profit from the takeover attempt itself (e.g. - greenmail).
Growth accounting
Mesokurtic
Corporate raider
Total return swap
9. The company's total cost of capital in money terms.
Capital charge
Currency swap
Present value model or discounted cash flow model
Time series
10. A type of swap transaction used as a credit derivative in which one party makes peri-odic payments to the other and receives the prom-ise of a payoff if a third party defaults.
Takeover premium
Credit swap
Stock grants
Other comprehensive income
11. The government's holding of foreign cun; - e.!}cy.
Univariate distribution
Qualifying special purpose entities
Free cash flow hypothesis
U.S. official reserves
12. CAPM An adaptation of the CAPM that adds to the CAPM a premium for small size and company-specific risk.
Expanded
Centralized risk management or companywide risk management
Price momentum
Economic profit
13. The accounting principle that expenses should be recognized when the associ-ated revenue is recognized.
Statement of retained earnings
Arrears swap
Floorlet
Matching principle
14. A forward contract to enter into a swap.
Forward swap
Sensitivity analysis
Capitalization rate
Aging schedule
15. A swap in which the payments are basedon the difference between interest rates in twocountries but payments are made in only a singlecurrency.
Salvage value
Diff swaps
Pet projects
Purchasing power gain
16. 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.
Adjusted present value (APV)
Proportionate consolidation
Chain rule of forecasting
Portfolio implementation problem
17. An option strategy involving the purchase of one option and sale of another option that is identical to the first in all respects except either exercise price or expiration.
Return on assets (ROA)
Root mean square(l er ror (RMSE)
Corporate raider
Spread
18. The price of a security with accrued interest.
Normalized
Investment objectives
Full price
Likelibood
19. The differences between actual and predicted value of time series outside the sample period used to fit the model.
Performance guarantee
Out-of-sample forecast errors
Gross domestic product
Mean
20. A measure of dispersion relat-ing to a population - calculated as the mean of the squared deviations around the population mean.
Population variance
Adjusted R2
Nominal scale
Standardized beta
21. Analysis that involves com-parisons across individuals in a group over a given time period or at a given point in time.
Cross-sectional analysis
Autocorrelation
Butterfly spread
Contingent consideration
22. A system that allows individual units within an organization to manage risk. Decentralization results in duplication ofeffort but has the advantage of having people closer to the risk be more d irectly involved in its management.
Guideline public company method
Decentralized risk management
Cyclical businesses
Fixed asset turnover
23. The value that investors forgo by choosing a particular course of action; the value of something in its best alternative use.
Opportunity cost
Locked limit
Market risk premium
Law of one price
24. A type of weighted mean computed by averaging the reciprocals of the ohservations - then taking the reciprocal of that average.
Deferred tax assets
Harmonic mean
Time value decay
Protective put
25. Segment revenue divided by seg-ment assets .
Debt rating approach
Segment turnover
Cost of preferred stock
Look-ahead bias
26. The minimum real wage rate needed to maintain life.
Nonmonetary assets and liabilities
Horizontal merger
Subsistence real wage rate
Margin
27. Uncertainty with respect to the quantity of goods and services that a company is able to sell and the price it is able to achieve; the risk related to the uncertainty of revenues.
Sales risk
Revenue
Ope ating profit margin (operating margin)
Creditworthiness
28. The arithmetic mean value of a population; the arithmetic mean of all the obser-vations or values in the population.
Population mean
Poison pill
Shark repellents
Absolute dispersion
29. A striNgent measure of liquidity th t ind'cates a company's ab'li ty to satisfY current liabilities with its most liquid assets - calcu-lated as (cash + short-tenn marketable invest-ments + receivables) divided by current liabilities.
Spreadsheet modeling
Objective probabilities
Quick ratio - or acid test ratio
Discount for lack of control
30. The price received to sell an asset or trans-fer a liability.
Accrued interest
Equitizing cash
Multiplication rule for probabilities
Exit price
31. An approach to valuation that involves using a price multiple to evaluate whether an asset is relatively fairly valued - rela-tively undervalued - or relatively overvalued when compared to a benchmark value of the multiple.
Method of comparables
Credit swap
Subsistence real wage rate
Active investment managers
32. A strategy in which a position is hedged by making frequent adjustments to the quantity of the instrument used for hedging in relation to the instrument being hedged.
Static trade-off theory of capital structure
Covered call
Dynamic hedging
Electronic funds transfer
33. Controlling additional property throughreinvestment - refinancing - and exchanging.
Financial flexibility
Pyramiding
Lessor
North
34. 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.
Interval scale
Equity swap
Enhanced derivatives products companies (EDPC)
Business risk
35. Orders to buy or sell that are too large for the liquidity ordinarily available in dealer networks or stock exchanges.
Systematic factors
Block
Sampling
Indirect format (indirect method)
36. 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
Temporal method
Du Pont analysis
Duration
Dealing securities
37. 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.
Synthetic index fund
Bootstrapping earnings
Payoff
Before-tax cash flow
38. Assets that are expected to be consumed or converted into cash in the near future - typically one year or less.
Goodwill
Pairs trading
Cost of preferred stock
Current assets - or liquid assets
39. In reference to <wrporate taxes a split-rate system taxes earnings to be distributed as dividends at a different rate than earnings to be retained. Corporate profits distributed as dividends are taxed at a lower rate than those retained in the busine
Split-rate
Liquidity risk
Matching strategy
Fundamental beta
40. A valuation indicator based on past pdce movement.
Justified price multiple (or warranted price multiple or intrinsic price multiple)
Price momentum
Creative response
Total probability rule for expected value
41. An investment where the investor exerts control over the investee - typically by having a greater than 50 percent ownership in the investee.
Joint venture
Market risk premium
Justified price multiple (or warranted price multiple or intrinsic price multiple)
Controlling interest
42. The possibility that when we use a time-series sample - our statistical conclusion may be sensitive to the starting and ending dates of the sample.
White sqnire
Time-period bias
Qualitative dependent variables
Tax risk
43. A sample measure of the degree of dispersion of a distribution - calculated by dividing the sum of the squared deviations from the sam-ple mean by the sample size minus 1.
Sample variance
Market-extraction method
Momentum indicators
Minimum-variance portfolio
44. Market makers that buy and sell by quoting a bid and an ask price. They are the primary providers ofliquidity to the market.
Autoregressive (AR) model
Floor traders or locals
Book value equity per share
Interest coverage
45. A spontaneous form of credit in which a purchaser of the goods or service is financing its purchase by delaying the date on which payment is made.
Cash-flow-statement-based accruals ratio
Bond-equivalent yield
Trade credit
Dividend payout ratio
46. Earnings per share divided by price; the reciprocal of the PIE ratio.
Earnings yield
Cash-generating unit
Double-entry accounting
Monitoring costs
47. The value of a company if the com-pany were dissolved and its assets sold individually.
Forward integration
Margin
Recapture premium
Liquidation value
48. A reduction in proportional ownership inter-est as a result of the issuance of new shares.
Dilution
Fixed charge coverage
Exports
General Agreement on Tariffs and Trade
49. The ratio of the market value of debt and equity to the replacement cost of total assets.
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50. A forward contract calling for one party to make a fixed interest payment and the other to make an interest pay-ment at a rate to be determined at the contract expiration.
Benchmark value of the multiple
Continuing residual income
Contingent consideration
Forward rate agreement (FRA)