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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. With the accounting systems - a formal record of increases and decreases in a specific asset - liability - component of owners' equity - rev-enue - or expense.






2. Another term for the historical method of estimating VAR. This term is somewhat misleading in that the method involves not a simulation of the past butrather what actually happened in the past - some-times adjusted to reflect the fact that a differen






3. A financial instrument whose valuede ends on the value of some nderlying asset orfactor (e.g. - a stock price - an interest rate - orexchange rate ).






4. Accounting method in which the only relevant transactions for the financial statements are those that involve cash.






5. A forward contract in which the underlying is a bond.






6. A method of accounting for abusiness combination where the acquiring com-pany allocates the purchase price to each assetacquired and liability assumed at fair value. If thepurchase price exceeds the allocation - the excessis recorded as goodwill.






7. Asset allocation in which the invest-ment in the market is increased if one forecasts that the market will outperform T-bills.






8. An electronic payment network available to businesses - individuals - and financial institutions in the United States - U.S. -Territories - and Canada.






9. A trader who offers to buy or sell futures contracts - holding the position for only a brief period of time. Scalpers attempt to profit by buy-ing at the bid price and selling at the higher ask price.






10. With reference to the presenta-tion of expenses in an income statement - the grouping together of expenses by similar nature - e.g. - all depreciation expenses.






11. Regulation that seeks to keep the rate of return in the industry at a com-petitive level by not allowing excessive prices to be charged.






12. The probability of an event given (conditioned on) another event.






13. The periodic investment of a fixed amount of money.






14. Probabilities that generally do not vary from person to person; includes a pri-ori and objective probabilities.






15. Observations through time on a single characteristic of multiple observational units.






16. The preference some investors have for shares that exhibit certain characteristics.






17. A function with non-negative values such that probability can be described by areas under the curve graphing the function.






18. The value of a company if the com-pany were dissolved and its assets sold individually.






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






20. 1) A contract on an interest rate - whereby at periodic payment dates - the writer of the cap pays the difference between the market interest rate and a specified cap rate if - and only if - this differ-ence is positive. This is equivalent to a strea






21. The estimated fair value of the price multiple - usually based on fore-casted fundamentals or comparables.






22. Desired investment outcomes; includes risk objectives and return objectives.






23. A profitability ratio calcu-lated as net income divided by average sharehold-ers' equity.






24. An activity ratio equal to the number of days in period divided by receivables turnover.






25. The after-tax net operating profits as a percent of total assets or capital.






26. The analyst'S estimate of a stock's value at a particular point in the future .






27. The ability to terminate a proj-ect at some future time if the financial results are disappointing.






28. A method of estimating VAR that uses data from the returns of the portfolio over a recent past period and compiles this data in the form of a histogram.






29. An approach to recognizing credit losses on customer receivables in which the company waits until such time as a customer has defaulted and only then recognizes the loss.






30. Very liquid short-tenn investments - usually maturing in 90 days or less.






31. The internal rate of return on a portfol io - taking account of all cash flows.






32. A profitability ratio calculated as (net income - preferred divi-dends) divided by average common equity; equal to the return on equity ratio when no preferred equity is outstanding.






33. A factor related to the econ-omy - such as the inflation rate - industrial produc-tion - or economic sector membership. acroeconomic factor model A multifac tor model in which the factors are surprises in macroeco-nomic variables that significan tly






34. An arrangement whereby a customer authorizes a debit to a demand account; typically used by companies to collect routine pay-ments for services.






35. Plan in which the company promises to pay a certain annual amount (defined benefit) to the employee after retirement. The company bears the investment risk of the plan assets .






36. A method for accounting for the effect of options (and warrants) on earnings per share (EPS) that specifies what EPS would have been if the options and warrants had been exercised and the company had used the pro-ceeds to repurchase common stock.






37. The hypothesis that higher debt levels discipline managers by forcing them to make fixed debt service payments and by reducing the company's free cash flow.






38. The official price - designated by the clearinghouse - from which daily gains and losses will be determined and marked to market.






39. The relationship of the quantity of an asset being hedged to the quantity of the deriva-tive used for hedging.






40. An annuity having a first cash flow that is paid immediately.






41. A country's record of international trading - borrowing - and lending.






42. Under U.S. GAAP - a measure used in estimating a defined-benefit pen-sion plan's liabilities - defined as 'the actuarial present value as of a date of all benefits attributed by the pension benefit formula to employee ser-vice rendered prior to that






43. A variation of VAR that reflects the risk of a company's earnings instead of its market value.






44. A model that specifies an asset's intrinsic value.






45. A situation in a futures market where the current futures price is greater than the current spot price for the underlying asset.






46. An opportunity to conduct an arbitrage; an opportunity to earn an expected positive net profit without risk and with no net investment of money.






47. Expectations that differfrom consensus expectations.






48. For accounting purposes - the exchange rates that existed when the assets and liabilities were initially recorded.






49. Unexpected earnings divided by the standard deviation of analysts' earnings forecasts.






50. Accounting in which some income items are reported as part of stockholders' equity rather than as gains and losses on the income statement; certain items of comprehensive income bypass the income statement and appear as direct adjustments to sharehol