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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. The difference between current assets and current liabilities.






2. 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.






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






4. A distribution that specifies the probabilities of a random variable's possible outcomes.






5. Activities that are part of the day-to-day business functioning of an entity - such as selling inven tory and providing services.






6. A company's ability to satisfY its short-term obligations using assets that are most readily con-verted into cash; the ability to trade a futures con-tract - either selling a previously purchased contract or purchasing a previously sold contract.






7. A trade in two closely related stocks involving the short sale of one and the pur-chase of the other.






8. Investing on the basis of dif-ferential expectations.






9. Is Derivatives in which the payoffs occur if a specific event occurs; generally referred to as options.






10. A rule explaining the uncon-ditional probability of an event in terms of proba-bilities of the event conditional on mutually exclusive and exhaustive scenarios.






11. A valuation ratio calculated as price per share divided by book value per share.






12. A financial instrument that gives one party the right - but not the obligation - to buy or sell an underlying asset from or to another party at a fixed price over a specific period of time. Also referred to as contingent claims.






13. The intercept and slope coefficient(s) of a regression.






14. A quoted interest rate that does not account for compounding within the year.






15. The yield to maturity on a basis that ignores compounding.






16. A dollar deposited outside the United States.






17. 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.






18. The amount of variability pres-ent without comparison to any reference point or benchmark.






19. Options that are far in-the-money.






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






21. Theories that posit that cor-porate executives are motivated to engage in mergers to maximize the size of their company rather than shareholder value.






22. An estimate of a parameter that involves combining (pooling) observations from two or more samples.






23. P/E calculated on the basis of a forecast of EPS; a stock's current price divided by next year's expected earnings.






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






25. Netting the market values of all contracts - not just derivatives - between parties.






26. An approach for estimating a country's equity risk premium. The market rate of return is estimated as the sum of the dividend yield and the growth rate in dividends for a market index. Subtracting the risk-free rate of return from the estimated marke






27. The excess of assets over liabilities; the residual interest of shareholders in the assets of an entity after deducting the entity's liabilities.

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28. Linear regression involv-ing two or more independent variables.






29. 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






30. A con-flict of interest that arises when the agent in an agency relationship has goals and incentives that differ from the principal to whom the agent owes a fiduciary duty.






31. An act passed by the U.S. Con-gress in 2002 that created the Public Company Accounting Oversight Board (PCAOB) to oversee auditors.






32. The return on a portfolio minus the return on the portfolio's benchmark.






33. The part of the execution step of the portfolio management process that involves the implementation of port-folio decisions by trading desks.






34. An interest rate swap in which one party pays a fixed rate and the other pays a float-ing rate - with both sets of payments in the same currency.






35. Correlation between adj acent observations in a time ser ies.






36. Costs associated with the conflict of interest present when a company is managed by non-owners. Agency costs result from the inher-ent conflicts of interest between managers and equity owners.






37. A procedure used primarily in futures markets in which the parties to a contract settle the amount owed daily. Also known as the daily settlement.






38. The prooability of an observation - given a par ticular set of conditions.






39. The strategy of using futures contracts to enter the market without an immediate outlay of cash.






40. A two-dimensional plot of pairs of obser-vations on two data series.






41. The sample autocorrela-tions of the residuals.






42. A country that is borrowing more from the rest of the world than it is lending to it.






43. An option on the yield spread on a bond.






44. The fixed price at which an option holder can buy or sell the underlying.






45. The strongest form of short-term bank borrowing facilities; they are in effect for multiple years (e.g. - 3-5 years) and may have optional medium-term loan features.






46. The party obtaining the use of an asset through a lease.






47. A third party that is sought out by the target company's board to purchase the target in lieu of a hostile bidde .






48. A measure of th e yield on the undel~ ing bond of a futures contract implied by pricing it as though the underlying will be delivered at the futures expiration.






49. Assets that are expected to bene-fit the company over an extended period of time (usually more than one year).






50. A form of restructuring in which sharehold-ers of a parent company receive a proportional number of shares in a new - separate entity; share-holders end up owning stock in two different companies where there used to be one.







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