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CFA Level2 Vocab

Subjects : certifications, cfa
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • 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. 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.






2. A principle stating that the pr:obability that A or B occurs (both occur) equals he probabili ty thab A occ rs - plus the probabir ty tha~ B occurs - minus the probabil-ity that both A and B occur.






3. An investment decision rule that accepts projects or investments for which the IRR is greater than the opportunity cost of capital.






4. The duration without dividing by 1 plus the bond's yield to maturity. The term - named for one of the economists who first derived it - is used to distinguish the calculation from mod-ified duration. See also modified duration.






5. 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.






6. The expected value of a stated event given that another event has occurred.






7. An estimation method based on the criterion of minimizing the sum of the squared residuals of a regression.






8. The evaluation of risk-adjusted performance; the evaluation of invest-ment skill.






9. An option strategy involving the purchase of two puts and one call.






10. A transaction in which a position in the underlying is protected by buying a put and selling a call with the premium from the sale of the call offsetting the premium from the purchase of the put. It can also be used to protect a floating-rate borrowe






11. With reference to investment selection processes - an approach that starts with macro selection (i.e. - identifying attractive geo-graphic segments andVor industry segments) and then addresses selection 0 the most attractive investments within those






12. Quantiles that divide a distribution into 10 equal parts.






13. An experiment that can produce one of two outcomes.






14. Agency costs that are incurred despite adequate monitoring and bonding of management.






15. An estimate of the average number of days it takes deposited checks to clear; average daily float divided by average daily deposit.






16. A strategic corporate goal repre-senting the long-term proportion of earnings that the company intends to distribute to shareholders as dividends.






17. A ratio derived from the market; sales price divided by annual gross income equals CIM.






18. When a company has a single risk management group that monitors and controls all of the risk-taking activities of the organization.






19. An Activity ratio calculated as total revenue divided by average net fixed assets.






20. The relationship between earnings - dividends - and book value in which end-ing book value is equal to the beginning book value plus earnings less dividends - apart from ownership transactions.






21. Unex-pected earnings per share divided by the standard deviation of unexpected earnings per share over a specified prior time period.






22. The variance of active returns; active risk raised to the second power.






23. 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.






24. The rate of return from a cash-and-carry transaction implied by the futures price relative to the spot price.






25. A theory of economic growth based on the idea that real CDP per person grows because of the choices that people make in the pursuit of profit and that growth can persist indefinitely.






26. Next twelve months P/E: current market price divided by an estimated next twelve months EPS.






27. A procedure for determining the interest on a loan or bond in which the interest is deducted from the face value in advance.






28. The graphical representation of a model of asset price dynamics in which - at each period - the asset moves up wi t probability p or down with probability (I - p).






29. 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.






30. Costs that fluctuate with the level of production and sales.






31. The application of a set of criteria to reduce a set of potential investments to a smaller set having certain desired characteristics.






32. With reference to grouped data - the most frequently occurring interval.






33. The expected value (the probability-weighted average) of squared deviations from a random variable's expected value.






34. An offset to revenue reflecting any cash refunds - credits on account - and discounts from sales prices given to cus-tomers who purchased defective or unsatisfactory items.






35. A balance sheet organized so as to group together the various assets and liabilities into subcategories (e.g. - current and noncurrent) .






36. A theory of regulatory behavior that predicts that regulators will eventually be cap-tured by special interests of the industry being regulated.






37. Mean active return divided by active risk; or alpha divided by the standarddeviation of diversifiable risk.






38. Probabilities reflecting beliefs prior to the arrival of new information.






39. 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.






40. An industry's underlying eco-nomic and technical characteristics.






41. Economic characteristics of a busi-ness such as profitability - financial strength - and risk.






42. When assets trans-lated at the current exchange rate are greater in amount than liabilities translated at the current exchange rate. Assets exposed to translation gains or losses exceed the exposed liabilities.






43. A portfolio offering the highest expected return for a given level of risk as mea-sured by variance or standard deviation of return.






44. The minimum real wage rate needed to maintain life.






45. A scheme of measuring differ-ences. The four types of measurement scales are nominal - ordinal - interval - and ratio.






46. A financial statement that reconciles beginning-of-period and end-of-period balance sheet values of cash; consists of three parts: cash flows from oper-ating activities - cash flows from investing activities - and cash flows from financing activities






47. With reference to equity investors - investors who are focused on paying a relatively low share price in relation to earnings or assets per share.






48. A long-term pattern of movement in a partic-ular direction.






49. A taxable loss in the current period that may be used to reduce future taxable income.






50. An act passed by the U.S. Congress in 1934 that created the Securi-ties and Exchange Commission (SEC) - gave the SEC authority over all aspects of the securities industry - and empowered the SEC to require peri-odic reporting by companies with public