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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 risk associated with the pos-sibility that a payment currently due will not be made.
Estimator
Rate of return
Current credit risk
Commodity futures
2. The expected excess return on the market over the risk-free rate.
Pairs arbitrage
Discount for lack of control
Cash conversion cycle (net operating cycle)
Market risk premium
3. The combination of the underlying - puts - calls - and risk-free bonds that replicates a forward contract.
Index amortizing swap
Trimmed mean
Labor productivity
Synthetic forward contract
4. With respect to the format of the income statement - a format that presents a subtotal for gross profit (revenue minus cost of goods sold).
Multi-step format
Cheapest to deliver
Investment constraints
External growth
5. A solvency ratio calculated as EBIT divided by interest payments.
Bayes' formula
Price momentum
Return on equity (ROE)
Interest coverage
6. The condition in a financial mar-ket in which two equivalent financial instruments or combinations of financial instruments can sell for only one price. Equivalent to the principle that no arbitrage opportunities are possible.
Residual dividend approach
Bootstrapping earnings
Law of one price
Credit spread option
7. The percentage of total earnings paid out in dividends in any given year (in per-share terms - DPS/ EPS).
Bond-equivalent yield
Payout ratio
Parametric test
Currency option
8. The procedure of drawing a sample to satisfy the definition of a simple ran-dom sample.
Simple random sampling
Initial margin requirement
Sustainable growth rate
Moneyness
9. The positive square root of semivari-ance (sometimes called semistandard deviation) .
Semideviation
Assignment of accounts receivable
Direct write-off method
Double declining balance depreciation
10. A tactic used by acquirers to circumvent target management's objections to a proposed merger by submitting the proposal directly to the target company's board of directors.
Cost averaging
Population mean
Bear hug
Active risk squared
11. The use of inventory as collat-eral for a loan. Though the lender has claim to some or all of the company's inventory - the com-pany may still sell or use the inventory in the ordi-nary course of business.
Nondeliverable forwards (NDFs)
Cash price or spot price
Inventory blanket lien
Stratified random sampling
12. The existence of an exact linear relation between two or more independent vari-ables or combinations of independent variables.
Perfect collinearity
Implied yield
Commodity swap
Creative response
13. 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
Credit
Diff swaps
Payout ratio
14. A forward contract to enter into a swap.
Constant maturity swap or
Forward swap
Going-concern value
Foreign exchange market
15. CreaLing a contrac t with standard and generally accepted terms - which makes it moreacceptable to a broader group of participants.
Point estimate
Contingent clain
Homogenization
Business risk
16. Any outcome or specified set of outcomes of a random variable.
Dividend payout policy
Multivariate normal distribution
Event
Tracking risk
17. Trading ex-dividend refers to shares that no longer carry the right to the next dividend payment.
Ex-dividend
Error autocorrelation
Root mean square(l er ror (RMSE)
Segment margin
18. The extent to which a company's operations are predictable with substantial confidence.
VISibility
Sales risk
Poison pill
Net liability balance sheet exposure
19. A country that is borrowing more from the rest of the world than it is lending to it.
Simulation
Real GDP per person
Cash
Net borrower
20. A forecasting approach that involves moving from international and national macroeconomic forecasts to industry forecasts and then to individual company and asset forecasts.
Top-down forecasting approach
Conditional variances
Brokerage
Posterior probability
21. PIE PI Es based on normalized EPS data.
Normalized
Liquidity
Annuity
Active factor risk
22. Computer-generated sensitivity or sce-nario analysis that is based on probability models fo r the factors that drive outcomes.
Efficiency
Accounting risk
Semivariance
Simulation
23. Private equity investors in development-stage companies.
Error term
Venture capital investors
Exposure to foreign exchange risk
Dividend displacement of earnings
24. Orders to buy or sell that are too large for the liquidity ordinarily available in dealer networks or stock exchanges.
Debt covenants
Empirical probability
Paired observations
Block
25. A loan in which the interest rate is reset at least once after the starting date.
Residual loss
Floating-rate loan
Materiality
Central limit theorem
26. A procedure used in certain deriva-tive transactions that specifies that the long and short parties engage in the equivalent cash value of a delivery transaction.
Centralized risk management or companywide risk management
Cash settlement
Error autocorrelation
Acquisition method
27. Income as reported on the income statement - in accordance with prevailing account-ing standards - before the provisions for income tax expense.
Enterprise value multiple
Statistics
U.S. official reserves
Accounting profit (income before taxes or pretax income)
28. Very liquid short-tenn investments - usually maturing in 90 days or less.
Cash equivalents
Economic value added (EVA)
Dynamic hedging
Ordinary shares (common stock or common shares)
29. A condition in the futures markets in which the benefits of holding an asset exceed the costs - leaving the futures price less than the spot price.
ackwardation
Debt with warrants
Electronic funds transfer
Justified (fundamental)
30. An acquisition in which the acquirer gives the target company's shareholders some combination of cash and securities in exchange for shares of the target company's stock.
Stock purchase
Exercise rate or strike rate
Normalized
Compiled f'mancial statements
31. A time series in which the value ofthe series in one period is the value of the series in the previous period plus an unpredictable random error.
Random walk
Sharpe's measure
Nonmonetary assets and liabilities
Holding period return
32. The amount of money that a trader deposits in a margin account. The term is derived from the stock market practice in which an investor bor-rows a portion of the money required to purchase a certain amount of stock. In futures markets - there is no b
American option
Margin
Net revenue
Futures exchange
33. An estimate of the average time that elapses between paying suppliers for materi-als and collecting cash from the subsequent sale of goods produced.
Fundamental beta
Net operating cycle
Book value of equity (or book value)
Variance
34. Potential future payments to the seller that are contingent on the achieve-ment of certain agreed on occurrences.
Period costs
Discount rate
Money market yield (or CD equivalent yield
Contingent consideration
35. Amounts that a business owes to its vendors for goods and services that were pur-chased from them but which have not yet been paid.
Accounts payable
Population standard deviation
Present value (PV)
Financial leverage ratio
36. The ability to react and adapt to financial adversities and opportunities.
Arrears swap
Comparables (comps - guideline assets - guideline com-panies)
Financial flexibility
Greenmail
37. The relationship between the option price and the underlying price - which reflects the sensi-tivity of the price of the option to changes in the price of the underlying.
Monetary/nonmonetary method
Hypothesis testing
Delta
Initial public offering (IPO)
38. 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.
Ratio scales
Adjusted present value (APV)
Accrual basis
Interest rate put
39. Dummy variables used as dependent variables rather than as inde-pendent variables.
Qualitative dependent variables
Liquidation value
Production-flexibility
Dependent
40. A calculation of yield that is annualized using the ratio of 365 to the number of days to maturity. Bond equivalent yield allows for the restatement and comparison of securities with different compounding periods.
Cannibalization
Bond equivalent yield
Safety-first Rules
Cap
41. The date on which the parties to a swap make payments.
Minimum-variance frontier
Simulation trial
Venture capital investors
Settlement date or payment date
42. Revenue after adjustments (e.g. - for estimated returns or for amounts unlikely to be collected).
Net revenue
Voluntary export restraint
Interval scale
Taxable income
43. The estimated fair value of the price multiple - usually based on fore-casted fundamentals or comparables.
Versioning
Justified price multiple (or warranted price multiple or intrinsic price multiple)
Cash-flow-statement-based aggregate accruals
In-process research and development
44. The fixed rate at which the holder of an interest rate option can buy or sell the underlying.
Degree of total leverage
Segment debt ratio
Exercise rate or strike rate
Systematic sampling
45. A type of finance lease - from a lessor perspective - where the present value of the lease payments (lease receivable) equals the carry-ing value of the leased asset. The revenues earned by the lessor are financing in nature.
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46. PIE The price-to-earnings ratio that is fair - warranted - or justified on the basis of forecasted fundamentals.
Tangible assets
Investment strategy
Pet projects
Justified (fundamental)
47. A depreciation method tHat allocates the cost of a long-lived asset based on-actual usage during the period .
Random walk
Accrual basis
Units-of-production method
Dummy variable
48. The remaining (undepreciated) bal-ance of an asset's purchase cost. For liabilities - the face value of a bond minus any unamortized dis-count - or plus any unamortized premium.
Net book value
Market price of risk
Securities Exchange Act of 1934
Grouping by nature
49. In reference to corporate taxes - a system that imputes - or attributes - taxes at only one level of taxation. For countries using an imputation tax system - taxes on dividends are effectively levied only at the shareholder rate. Taxes are paid at th
Pure discount instruments
Off-balance sheet imancing
Blockage factor
Imputation
50. The probability of an event estimated as a relative frequency of occurrence.
Taxable temporary differences
Empirical probability
External growth
Cash-flow-statement-based accruals ratio