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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.
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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. Momentum indicators based on price.
Merger
Molodovsky effect
Technical indicators
Estimation
2. When a company has a single risk management group that monitors and controls all of the risk-taking activities of the organization.
Centralized risk management or companywide risk management
Proxy fight
Account
Degrees of freedom (df)
3. The market value of debt and equity.
Segment turnover
Market value of invested capital
Balance of payments accounts
Classified balance sheet
4. Debt or equity financial assets bought with the inten-tion to sell them in the near term - usually less than three months; securities that a company intends to trade.
Potential credit risk
Offsetting
Cost of equity
Held-for-trading securities (trading securities)
5. A combination of interest rate put options designed to hedge a lender against lower rates on a floating-rate loan.
Homogenization
Committed lines of credit
Floor
Deliveryoption
6. An option in which the underlying is a stock index.
Common-size analysis
Equity options
Installment method (installment-sales method)
Index option
7. A synonym for robust standard errors.
White-corrected standard errors
Investment objectives
Nominal exchange rate
Conglomerate merger
8. A company that has similar business risk; usually in the same industry and preferably with a single line of business.
Linear regression
Population mean
Theta
omparable company
9. Earnings adjusted for nonrecur-ring - non-economic - or other unusual items to elim-inate anomalies andlor facilitate comparisons.
Simple random sampling
Direct income capitalization approach
Normalized earnings
Money market
10. 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.
Dynamic hedging
Cash-flow-statement-based accruals ratio
Leading
PEG
11. A profitability ratio calcu-lated as net income divided by average sharehold-ers' equity.
Guideline public companies
Prepaid expense
Minimum-variance frontier
Return on equity (ROE)
12. The process by which options and other derivatives are priced by treating investors as though they were risk neutral.
Dividends per share
Nonconventional cash flow
Risk-neutral valuation
Statistic
13. An exchange rate pegged at a value decided by the government or central bank and that blocks the unregulated forces of demand and supply by direct intervention in the foreign exchange market.
Valuation ratios
Accounting profit (income before taxes or pretax income)
Corporate governance
Fixed exchange rate
14. A weighted average of the after-tax required rates of return on a company's common stock - preferred stock - and long-term debt - where the weights are the fraction of each source of financing in the company's target capital structure.
Active risk squared
Butterfly spread
Unearned revenue (deferred revenue)
Weighted-average cost of capital (WACC)
15. The minimum rate of return required by an investor to invest in an asset - given the asset's riskiness.
Diffuse prior
Required rate of return
Sales returns and allowances
Semivariance
16. The procedure of drawing a sample to satisfy the definition of a simple ran-dom sample.
Tobin's q
Simple random sampling
Abnormal earnings
Strangle
17. In the context of the Treynor-Black model - the portfolio formed by mixing analyzed stocks of perceived nonzero alpha values. This portfolio is ultimately mixed with the passive mar-ket index portfolio.
Equity risk premium
Interest rate
Futures exchange
Active portfolio
18. An indicator of profitability - calculated as net income divided by revenue; indicates how much of each dollar of revenues is left after all costs and expenses.
Underlying
Estimate
Sample mean
Net profit margin (profit margin or return on sales)
19. Heightened uncertainty regarding a company's ability to meet its various obligations because of lower or negative earnings.
Exports
Dividends per share
Cash-flow-statement-based accruals ratio
Financial distress
20. Future benefits promised to the employee regardless of continuing service. Bene-fits typically vest after a specified period of service or a specified period of service combined with age.
Put
Vested benefits
Expected value
Currency forward
21. A merger involving companies at different positions of the same production chain; for example - a supplier or a distributor.
Vertical merger
Target payout ratio
Other comprehensive income
Share-the-gains - share-the-pains theory
22. An option strategy involving the purchase of two calls and one put.
Trimmed mean
Strap
Technical indicators
Mature phase
23. A situation in a futures market where the current futures price is greater than the current spot price for the underlying asset.
Market value of invested capital
Working capital
Labor productivity
Contango
24. With reference to equity investors - investors whose investment disciplines cannot be clearly categorized as value or growth.
Market-oriented investors
Sampling
Unearned revenue (deferred revenue)
Orthogonal
25. The number of shares that would beoutstanding if all potentially dilutive claims oncommon shares (e.g. - convertible debt - convert-ible preferred stock - and employee stock options)were exercised.
Capital charge
Free cash flow to the
Diluted shares
Correlation analysis
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.
Basis point value (BPV)
Probability
Closeout netting
Asset-based approach
27. A poison pill takeover defense that gives target company shareholders the right to purchase shares of the acquirer at a significant discount to the market price - which has the effect of causing dilution to all existing acquiring com-pany shareholder
Net income (loss)
Flip-over pill
Type I error
Butterfly spread
28. The cash flow that is real-ized because of a decision; the changes or incre-ments to cash flows resulting from a decision or action.
Residual income model (RIM) (also discounted ahnormal earnings model or Edwards-Bell-Ohlson model)
Accumulated benefit obligation
Incremental cash flow
Interval
29. The amount of money a buyer pays and seller receives to engage in an option transaction.
Linear association
Financial reporting quality
Time-series data
Option price - option premium - or premium
30. A method of account-ing for joint ventures where the venturer's share of the assets - liabilities - income and expenses of the joint venture are combined on a line-by-line basis with similar items on the venturer's financial statements.
Proportionate consolidation
Sample statistic or statistic
Nominal exchange rate
Markowitz decision rule
31. The positive square root of the variance; a measure of dispersion in the same units as the original data.
Net profit margin (profit margin or return on sales)
Price momentum
Standard deviation
Creative response
32. Factors that affect the average returns of a large number of different assets.
Book value equity per share
Financial leverage ratio
Free cash flow method
Systematic factors
33. Dummy variables used as dependent variables rather than as inde-pendent variables.
Liruit move
Qualitative dependent variables
Mean reversion
Overall capitalization rate
34. An equation describing the expected return on any asset (or portfolio) as a linear function of its beta relative to the market portfolio.
Equity charge
Financial leverage ratio
Capital asset pricing model (CAPM)
Put-call parity
35. A procedure of selecting every kth member until reaching a sample of the desired size. The sample that results from this procedure should be approximately random.
Catalyst
Financial analysis
Systematic sampling
Mixed offering
36. The single-period interest rate for a completely risk-free security if no infla-tion were expected.
Real risk-free interest rate
Complement
A priori probability
Survey approach
37. An association or relationship between variables that cannot be graphed as a straight line.
Nonlinear relation
Provision
Autocorrelation
Rule of 70
38. 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.
Ordinary shares (common stock or common shares)
Due diligence
Unearned revenue (deferred revenue)
Bear spread
39. 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.
Payment netting
Divestiture
Guideline public companies
Sector neutralizing
40. A form of restructuring that involves the creation of a new legal entity and the sale of equity in it to outsiders.
Pure discount instruments
Parametric test
Credit swap
Equity carve-out
41. The ratio ofthe percentage change in operating income to the percentage change in units sold; the sensitivity of operating income to changes in units sold.
Liquidity premium
Degree of operating leverage (DOL)
Completed contract
Acquisition method
42. Estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.
Solvency ratios
Net realizable value
Multivariate distribution
Completed contract
43. A liquidity ratio that esti-mates the number of days that an entity could meet cash needs from liquid assets; calculated as (cash + short-term marketable investments + receivables) divided by daily cash expenditures.
Historical equity risk premium approach
Asian call option
Defensive interval ratio
Logit model
44. A quantity computed from or used to describe a sample of data.
Free cash flow to equity model
Diluted shares
Statistic
Agency costs of equity
45. A swap in which one party agrees to pay the total return on a security. Often used as a credit derivative - in which the underlying is a bond.
Neoclassical growth theory
Portfolio performance attribution
Stratified random sampling
Total return swap
46. R The correlation between the actual and forecasted values of the dependent variable in a regression.
Implied repo rate
Long
Multiple
Common-size analysis
47. To defer the decision to invest in a future projecn until the outcome of some or all of a current project is known. -Projects are sequenced through time - so that investing iN a project creates the option to invest in future projects.
Nonparametric test
Translation exposure
Project sequencing
Degree of confidence
48. A merger or acquisition that is to be paid for with cash; the cash for the merger might come from the acquiring company's existing assets or from a debt issue.
Abandonment option
Cash o£ fering
Guideline transactions method
Strip
49. Any outcome or specified set of outcomes of a random variable.
Completed contract
Liquidity
Binomial random variable
Event
50. Said of a sale in which proceeds are to be paid in installments over an extended period of time.
Installment
Profitability ratios
Frequency distribution
Market efficiency