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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. An option strategy involving the purchase of a Rut and a call wi th the same exercise price. A straddle is based on the expectation of high volatili ty of the underlying.
Straddle
Interest rate parity
Justified (fundamental)
Stated annual interest rate or quoted interest rate
2. The amount by which the takeover price for each share of stock must exceed the current stock price in order to entice shareholders to relinquish control of the com-pany to an acquirer.
Trade credit
Time to expiration
Takeover premium
Differential expectations
3. A swap in which each party makes ayments to the other in different currenmes.
Floorlet
Currency swap
Sector neutral
Straddle
4. The most common type of commun-size analysis - ill which the accounts in a given period are compared to a benchmark item in that same year.
Vertical common-size analysis
Price momentum
Creative response
First-order serial correlation
5. Describes two time series that have a long-term financial or economic relationship such that they do not diverge from each other without bound in the long run.
Cointegrated
Dividend discount model (DDM)
Percentiles
Foreign currency
6. The differential of infor-mation between corporate insiders and outsiders regarding the company's performance and prospects. Managers typically have more informa-tion about the company's performance and prospects than owners and creditors.
Active risk
Temporal method
Return on total capital
synunetric information
7. Describes a distribution that is more peaked than a normal distribution.
Terminal share price
Just-in-time method
Leptokurtic
Interest rate collar
8. The actual value of a variable minus its pre-dicted (or expected) value.
Backward integration
Real GDP per person
Surprise
Imports
9. Method of accounting in which the effect of transactions on financial condition and income are recorded when they occur - not when they are settled in cash.
Economic exposure
Real exchange rate
Net book value
Accrual basis
10. The number of indepen-dent observations used.
Brokerage
Degrees of freedom (df)
Net profit margin (profit margin or return on sales)
World Trade Organization
11. The possession of monopoly power in the relevant market and the willful acquisition or maintenance of that power - as distinguished from growth or development as a consequence of a superior product - business acumen - or historical accident.
Monopolization
Corporate raider
Futures exchange
Cointegrated
12. 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.
Dividend discount model based approach
Project sequencing
Money-weighted rate of return
Time value of money
13. A time series regressed on its own past values - in which the independent vari-able is a lagged value of the dependent variable.
Specific identification method
Real risk-free interest rate
Pull on liquidity
Autoregressive (AR) model
14. 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
Purchased in-process research and development costs
Weighted harmonic mean
Bond option
Delta hedge
15. An annualized return that accounts for the effect of interest on interest; EAY is computed by compounding 1 plus the holding period yield forward to one year - then subtracting 1.
Interest rate forward
Regime
Netting
Effective annual yield (EAY)
16. A forward contract to enter into a swap.
Macroeconomic factor
Forward swap
Nominal exchange rate
Materiality
17. A type of subsidiary engaged in derivatives trans-actions that is separated from the parent company in order to have a higher credit rating than the parent company.
Enhanced derivatives products companies (EDPC)
Accounts receivable turnover
Top-down analysis
Working capital management
18. Activities related to obtaining or repaying capital to be used in the business (e.g. - equity and long-term debt).
Parameter instability
Installment
Assignment of accounts receivable
Financing activities
19. A depreciation method tHat allocates the cost of a long-lived asset based on-actual usage during the period .
Multicollinearity
Report format
Units-of-production method
Monetary assets and liabilities
20. The market in which the currency of one country is exchanged for the cur-rency of another.
Safety stock
Downstream
Foreign exchange market
Earnings per share
21. A multifactor model In which statistical methods are applied to a set of historical returns to determine portfolios that best explain either historical return covariances or vanances.
Statistical factor models
Taxable temporary differences
Trust receipt arrangement
Measure of location
22. The risk associated with the conversion of foreign financial statements into domestic currency.
Translation exposure
Real risk-free interest rate
Commodity swap
Percentiles
23. Desired investment outcomes; includes risk objectives and return objectives.
Rate of return
Multicollinearity
Differentiation
Investment objectives
24. A formula that expresses the equivalence or parity of spot and forward rates - after adjusting for differences in the interest rates.
Interest rate parity
Vertical common-size analysis
Management buyout (MBO)
Pairs trading
25. A common or underlying element with which several variables are correlated.
Conversion factor
Price multiple
Proxy fight
Factor
26. Any rate used in finding the present value of a future cash flow.
Discount rate
Report format
Covered call
Basis point value (BPV)
27. With reference to time-series mod-els - a model in which the growth rate of the time series as a function of time is constant.
Trade-weighted index
Bond indentnre
Log-linear model
Normal contango
28. An amount equal to saving minus investment.
Activity ratios (asset utilization or operating efficiency ratios)
Method based on forecasted fundamentals
Decision rule
Private sector surplus or deficit
29. The yield to maturity on a basis that ignores compounding.
Functional currency
Expiration date
Nonparametric test
Bond-equivalent yield
30. 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
Panel data
Combination
Deferred tax assets
Free cash flow
31. Describes a time series whenits expected value and variance are cons tan t andfinite in all periods and when its covariance withitself for a fixed number of periods in the past orfuture is constant and finite in all periods.
Scalper
Absolute valuation model
Covariance stationary
Sampling distribution
32. The ratio of cash dividends paid to earnings for a period.
Probability distribution
Mature growth rate
Dividend payout ratio
Gamma
33. The process of valuing long-lived assets at fair value - rather than at cost less accumulated depreciation. Any resulting profit or loss is either reported on the income statement and/or through equity under revaluation surplus.
Tobin's q
Synthetic call
Daily settlement
Revaluation
34. A reduction or discount to value for shares that are not publicly traded.
Provision
Maturity premium
Specific identification method
Marketability discount
35. With reference to statisti. cal inference - the subdivision dealing with estimating the value of a population parameter.
Estimation
Offsetting
Present (price) value of a basis point (PVBP)
Scatter plot
36. An approach to investment analysis and security selection.
Clientele effect
Investment strategy
Rate-of-return regulation
Interest rate call
37. The first date that a share trades without (i.e. - 'ex') the dividend.
Capitalized cash flow model (method)
Ex-dividend date
Antidilutive
Number of days of receivables
38. 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
Flip-over pill
First-order serial correlation
Efficiency
Accrued expenses (accrued liabilities)
39. 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.
Classical growth theory
Law of one price
PEG ratio
Exchange ratio
40. A quantitative measure that specifies where data are centered.
Equity risk premium
Accrued expenses (accrued liabilities)
Poison pill
Measure of central tendency
41. An inventory accounting method in which the sales value of an item is reduced by the gross margin to calculate the item's cost.
Warehouse receipt arrangement
Retail method
Off-market
Gains
42. A linear regression model with two or more independent variables.
Multiple linear regression model
Capital market line (CML)
Yield to maturity
Swap spread
43. In the context of customer receipts - the amount of money that is in transit between pay-ments made by customers and the funds that are usable by the company.
Adjusted present value (APV)
Equity method
Float
Accumulated benefit obligation
44. The sum of market value of common equity - book value of preferred equity - and face value of debt.
Total invested capital
Theory of contestable markets
Price to cash flow
Forward swap
45. A variation of the market approach; establishes a value estimate based on the observed multiples from trading activity in the shares of public companies viewed as reasonably comparable to the subject private company.
Guideline public company method
Variance
Performance guarantee
Mean
46. Any outcome or specified set of outcomes of a random variable.
Current cost
Population mean
Event
Inverse price ratio
47. An unlimited funds environment assumes that the company can raise the funds it wants for all profitable projects simply by paying the required rate of return.
Active investment managers
Unlimited funds
Unclassified balance sheet
Conversion factor
48. An equation expressing the equiva-lence (parity) of a portfolio of a call and a bondwith a portfolio of a put and the underlying -which leads to the relationship between put andcall prices
Single-payment loan
Asset-based valuation
Put-call parity
Imports
49. Unexpected earnings divided by the standard deviation of analysts' earnings forecasts.
Deep out of the money
Commodity futures
Exposure to foreign exchange risk
Scaled earnings surprise
50. 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).
Heteroskedastic
Market price of risk
Corporate raider
Covered call