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CFA Level2 Vocab
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Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
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1. For data grouped into intervals - the fraction of total observations that are less than the value of the upper limit of a stated interval.
Independent
Accounting risk
Downstream
Cumulative relative frequency
2. Factor models that combine features of more than one type of factor model.
Segment debt ratio
Mixed factor models
Definition of value (or standard of value)
Floored swap
3. With reference to investmentselection processes - an approach that involves selection from all securities within a specified investment universe - i.e. - without prior narrowiNg of the universe on the bas' s of macroeconomj c or overall market consid
Government sector surplus or deficit
Bottom-up analysis
Capital structure
Payables turnover
4. The minimum real wage rate needed to maintain life.
Credit risk or default risk
Target semideviation
Subsistence real wage rate
Futures commission merchants (FCMs)
5. 1) The simultaneous purchase of an undervalued asset or portfolio and sale of an over-valued but equivalent asset or portfolio - in order to obtain a riskless profit on the price differential. Taking advantage of a market inefficiency in a risk-free
Balance-sheet-based accruals ratio
Stock grants
Arbitrage
Objective probabilities
6. A portfolio offering the highest expected return for a given level of risk as mea-sured by variance or standard deviation of return.
Efficient portfolio
Net lender
Sunk cost
Working capital turnover
7. Assets that are expected to be consumed or converted into cash in the near future - typically one year or less.
Income tax recoverable
Corporation
Equity forward
Current assets - or liquid assets
8. An intangible asset that represents the excess of the purchase price of an acquired com-pany over the value of the net assets acquired.
Decentralized risk management
Ratio scales
Exp ected holding-period return
Goodwill
9. An option strategy involving the purchase of one option and sale of another option that is identical to the first in all respects except either exercise price or expiration.
Sell-side analysts
If-converted method
Spread
Price to book value
10. With reference to statisti. cal inference - the subdivision dealing with estimating the value of a population parameter.
Installment method (installment-sales method)
Estimation
Accounting risk
Seats
11. 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.
LIFO method
Payment netting
Tax loss carry forward
Dispersion
12. A measure of central tendency computed by taking the nth root of the product of n non-negative values.
Money-weighted rate of return
Continuous time
Geometric mean
Other receivables
13. A variation of VAR that reflects the risk of a company's earnings instead of its market value.
Cash settlement
Book value of equity (or book value)
Earnings at risk (EAR)
Nominal risk-free interest rate
14. The use of inventory as collateral for a loan. The inventory is segregated and held in trust - and the proceeds of any sale must be remitted to the lender immediately. t-Test A hypothesis test using a statistic (I-statistic) that follows a t-<listrib
Trust receipt arrangement
Cnsistent
Unconditional heteroskedasticity
First-order serial correlation
15. Residual income after the forecast horizon.
Covered interest arbitrage
Continuing residual income
Debt-to-capital ratio
LIFO reserve
16. An equation describing the expected return on any asset (or portfolio) as a linear function of its beta relative to the market portfolio.
Down transition probability
Acquisition method
Hostile transaction
Capital asset pricing model (CAPM)
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.
Free cash flow method
Proxy statement
Binomial random variable
Method of comparables
18. The positive square root of the sample variance.
Share-the-gains - share-the-pains theory
Net liability balance sheet exposure
Complement
Sample standard deviation
19. In the context of the Treynor-Black model - the portfolio formed by mixing analyzed stocks of perceived nonzero alpha values. This portfolio is ultimately mixed with the passive mar-ket index portfolio.
Active risk squared
Active portfolio
Antidilutive
Event
20. The portion of an entity's income that is subject to income taxes under the tax laws of its jurisdiction.
Real exchange rate
Foreign exchange market
Taxable income
Double taxation
21. A sample measure of the degree of dispersion of a distribution - calculated by dividing the sum of the squared deviations from the sam-ple mean by the sample size minus 1.
Probability
Official settlements account
Sample variance
Cash
22. Options on individual stocks; also known as stock options.
Empirical probability
Equity options
Translation exposure
Takeover
23. A listing in which tile order of tile listed items does not matter.
Combination
Interest rate put
Standardized beta
Probability function
24. The risk that a company will suffer an extended diminution in market value relative to other companies in the same industry due to a demonstrated lack of concern for environmental - social - and governance risk factors.
Takeover
Reputational risk
Backtesting
Capitalized cash flow model (method)
25. In using the method of com parables - the value of a price mul-tiple for the comparison asset; when we have com-parison assets (a group) - the mean or median value of the multiple for the group of assets.
Parameter instability
Credit
Pairs arbitrage
Benchmark value of the multiple
26. The intercept and slope coefficient(s) of a regression.
Regression coefficients
Exp ected holding-period return
Passive portfolio
Horizontal common-size analysis
27. The purchase of the accumulated shares of a hostile investor by a company that is targeted for takeover by that investor - usually at a substan-tial premium over market price.
Nonstationarity
Linear interpolation
Greenmail
Implied repo rate
28. An option in which the underly-ing is an interest rate.
Financial leverage ratio
Interest rate option
Corporation
Enterprise risk management
29. When parties agree to exchange only the net amount owed from one party to the other.
Other post-employment benefits
Netting
Justified (fundamental)
Rho
30. 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.
Financing activities
Spin-off
Efficient portfolio
Stress testing
31. The number of indepen-dent observations used.
Period costs
Degrees of freedom (df)
Time-series data
Nonconventional cash flow
32. American Free Trade Agreement An agree-ment - which became effective on January 1 - 1994 - to eliminate all barriers to international trade between the United States - Canada - and Mexico after a 15-year phasing-in period.
North
Systematic factors
Statistical factor models
Permanent differences
33. In a nonconventional cash flow pattern - the initial outflow is not fol-lowed by inflows only - but the cash flows can flip from positive (inflows) to negative (outflows) again (or even change signs several times).
Working capital
Return on total capital
Nonconventional cash flow
Upstream
34. Aka 'Market efficiency. '
Rational efficient markets formulation
Foreign exchange market
Regime
Equity
35. Estimate of the aver-age number of days it takes to collect on credit accounts.
Recapture premium
Benchmark value of the multiple
Number of days of receivables
American option
36. A measurement scale that not only ranks data but also gives assurance that the differ-ences between scale values are equal.
Interval scale
Binomial model
Target capital structure
Normal contango
37. Company growth in output or sales that is achieved by making investments internally (i.e. - excludes growth achieved through mergers and acquisitions).
Voluntary export restraint
Discount rate
Organic growth
Derivatives dealers
38. An option in which the underlying value equals the exercise price.
Exhaustive
Book value of equity (or book value)
At the money
Real options
39. A country that is lending more to the rest of the world than it is borrowing from it.
Other comprehensive income
Net lender
Cost-of-service regulation
Component cost of capital
40. The uncertainty associated with tax laws.
Sole proprietorship
Imports
Seats
Tax risk
41. The date on which the parties to a swap make payments.
Settlement date or payment date
Foreign currency
Venture capital investors
Out-of-sample test
42. A feature of futures markets in which futures prices provide valuable information about the price of the underlying asset.
Standardizing
Cyclical businesses
Price discovery
Leveraged floating-rate note or leveraged floater
43. Trading ex-dividend refers to shares that no longer carry the right to the next dividend payment.
Cross-product netting
Price momentum
Ex-dividend
Investment strategy
44. To sell the assets of a company - division - or subsidiary piecemeal - typically because of bank-ruptcy; the form of bankruptcy that allows for the orderly satisfaction of creditors' claims after which the company ceases to exist.
Contingent clain
Creative response
Settlement period
Liquidation
45. The standard deviation of active returns.
Active risk
Dividends per share
Price-setting option
LIFO reserve
46. An operating segment or one level below an operating segment (referred to as a component) .
Mixed offering
Reporting unit
Probability distribution
Market risk
47. Futures contracts in which the underlying is a stock - bond - or currency.
Per unit contribution margin
Financial futures
Sample
Defined-contribution pension plans
48. With reference to grouped data - the most frequently occurring interval.
Modal interval
Functional currency
Regression coefficients
In-sample forecast errors
49. Projects in which influential managers want the corporation to invest. Often - unfortu-nately - pet projects are selected without undergo-ing normal capital budgeting analysis.
Pet projects
Partial regression coefficients or partial slope coeffi-cients
Tracking risk
Statistic
50. The proportion of a company's assets that is financed with long-term debt.
Basis point value (BPV)
Target company - or target
Long-term debt-ta-assets ratio
U.S. interest rate differential
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