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Test your basic knowledge |
CFA Level2 Vocab
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Study First
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. Activities related to obtaining or repaying capital to be used in the business (e.g. - equity and long-term debt).
Independent projects
Financing activities
Covariance
Tracking risk
2. Costs that remain at the same level regardless of a company's level of production and sales.
Fixed costs
Completed contract
Split-off
Simple interest
3. 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.
Comprehensive income
Subjective probability
Fixed exchange rate
Multiple linear regression
4. The difference between reported earnings per share and expected earnings per share.
Asset-based valuation
Corporate governance
Exposure to foreign exchange risk
Unexpected earnings (also earnings surprise)
5. A guarantee from the clear-inghouse that if one party makes money on a transaction - the clearinghouse ensures it will be paid.
Roy's safety first criterion
Diluted shares
Performance guarantee
Number of days of inventory
6. Carlo simulation method An approach to estimating a probability distribution of outcomes to examine what might happen if particular risks are faced. This method is widely used in the sci-ences as well as in business to study a variety of problems.
Free cash flow method
Exports
Monte
Shareholders' equity
7. A diagram with branches emanating from nodes representing either mutually exclu-sive chance events or mutually exclusive decisions.
Interest coverage
Option price - option premium - or premium
Tree diagram
Arithmetic mean
8. Instruments that payinterest as the difference between the amountborrowed and the amount paid back.
Put-call parity
Target balance
Pure discount instruments
Log-linear model
9. A forward contract in which the underlying is a bond.
Fixed-income forward
Net lender
Valuation
Securities Exchange Act of 1934
10. The last in - first out - method of accounting for inventory - which matches sales against the costs of items of inventory in the reverse order the items were placed in inventory (i.e. - inventory produced or acquired last are assumed to be sold firs
Long-term debt-ta-assets ratio
Dilution
Drag on li
LIFO method
11. A swap transaction in which at least one cash flow is tied to the return to an equity portfo-lio position - often an equity index.
Equity swap
Tie-in sales
Spread
Time-series data
12. With reference to a random vari-able - the property of having characteristics such as mean and variance that are not constant through time.
Factor risk premium (or factor price)
Interest coverage
Delta-normal method
Nonstationarity
13. The risk that portfolio value will fall below some minimum acceptable level over some time horizon.
Current taxes payable
Shortfall risk
Market risk
Interest rate
14. A test of a strategy or model using a sample outside the time period on which the strategy or model was developed.
American
Normalized earnings
Out-of-sample test
Cash o£ fering
15. The sum of the sample observations - divided by the sampfe size.
Sample mean
Weighted average cost method
Focus
Equity swap
16. A multivariate classification technique used to discriminate between groups - such as companies that either will or will not become bankrupt during some time frame.
Discrintinant analysis
Safety-first Rules
Liquidity risk
Dividend payout ratio
17. The use of fixed costs in operations.
Operating leverage
Contango
Future value (FV)
Winner's curse
18. The prooability of an observation - given a par ticular set of conditions.
Segment margin
Sell-side analysts
Likelibood
Long-term contract
19. The probability of correctly rejecting the null-that is - rejecting the null hypothesis when it is false.
Purchasing power loss
synunetric information
Power of a test
A priori probability
20. The amount of money a buyer pays and seller receives to engage in an option transaction.
Straight-line method
Accounting estimates
Holding period return
Option price - option premium - or premium
21. A profitability ratio calcu-lated as net income divided by average sharehold-ers' equity.
Company share-related factors
Price-setting option
Reporting unit
Return on equity (ROE)
22. An inter-national agreement signed in 1947 to reduce tar-iffs on international trade.
Sector neutralizing
Purchase method
Random number
General Agreement on Tariffs and Trade
23. Segment revenue divided by seg-ment assets .
Moneyness
Fair value
Segment turnover
Arithmetic mean
24. A reduction in the value of an asset as stated in the balance sheet.
Dealing securities
Nontariff barrier
Permanent differences
Write-down
25. The expected value of a stated event given that another event has occurred.
Option price - option premium - or premium
Inverse floater
Conditional expected value
Float
26. A basis for reporting investment income in which the investing entity recognizes a share of income as earned rather than as divi-dends when received. These transactions are typi-cally reflected in Investments in Associates or Equity Method Investment
Sample variance
Optimizer
Equity method
Exchange for physicals (EFP)
27. An activity ratio equal to the number of days in period divided by receivables turnover.
Materiality
Days of sales outstanding (DSO)
Time value of money
Liabilities
28. Agency costs that are incurred despite adequate monitoring and bonding of management.
Instability in the minimum-variance frontier
Yield beta
Residual loss
Currency option
29. Covering or containing all possible outcomes.
Asset purchase
Brokerage
Exhaustive
Dividends per share
30. 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.
Purchase method
Portfolio selection/composition problem
Risk management
Likelibood
31. A form of centralized risk management that typically encompasses the man-agement of a broad variety of risks - ind uding insuran -ce risk.
Implied repo rate
Combination
Enterprise risk management
Asset-based loan
32. Future benefits promised to the employee regardless of continuing service. Bene-fits typically vest after a specified period of service or a specified period of service combined with age.
Amortizing and accreting swaps
Scenario analysis
Working capital management
Vested benefits
33. An option strategy that combines two bull or bear spreads and has three exercise prices.
Butterfly spread
Position trader
Cross-product netting
In-the-money
34. Nonconvertible - noncallable preferred stock with a specified divi-dend rate that has a claim on earnings senior to the claim of common stock - and no maturity date.
Regulatory risk
Sharpe ratio
Payer swaption
Fixed-rate perpetual preferred stock
35. Mutually exclusive proj-ects compete directly with each other. For example - if Projects A and B are mutually exclusive - you can choose A or B - but you cannot choose both. n Factorial For a positive integer n - the product of the first n positive i
Underlying
Enterprise value multiple
Mutually exclusive projects
Monetary assets and liabilities
36. The periodic investment of a fixed amount of money.
Termination date
Cost averaging
Macroeconomic factor
Implied yield
37. A country that is lending more to the rest of the world than it is borrowing from it.
Equitizing cash
Net lender
Bernoulli trial
Simple random sampling
38. The sum of all values in a distribution or dataset - divided by the number of values summed; a synonym of arithmetic mean.
Pure-play method
Measurement scales
Mean
Bull spread
39. A method of revenue recognition in which - in each accounting period - the company estimates what percentage of the contract is complete and then reports that per-centage of the total contract revenue in its income statement.
Percentage-of-completion
Earnings management activity
Degree of financial leverage (DFL)
Swap spread
40. Long-term assets with physical sub-stance that are used in company operations - such as land (property) - plant - and equipment.
Tangible assets
Nominal rate
Roy's safety first criterion
Delta-normal method
41. A calculation of yield that is annualized using the ratio of 365 to the number of days to maturity. Bond equivalent yield allows for the restatement and comparison of securities with different compounding periods.
Risk-neutral probabilities
Credit VAR - default VAR - or credit at risk
Bond equivalent yield
Settlement date or payment date
42. An annuity with a first cash flow that is paid one period from the present.
Interest rate parity
Ordinary annuity
Absolute dispersion
Futures exchange
43. An increment or premium to value associated with a controlling ownership interest in a company.
Breusch-Pagan test
Control premium
Semivariance
Ratio spread
44. The error of rejecting a true null hypothesis.
Present value model or discounted cash flow model
Free cash flow to equity
Revaluation
Type I error
45. A money measure of the goods and services produced within a country's borders over a stated time period.
Book value equity per share
Gross domestic product
Daily settlement
Horizontal analysis
46. An option strategy that combines a bull spread and a bear spread having two differentexercise prices - which produces a risk-free payoffof the difference in the exercise prices.
Real risk-free interest rate
Implied volatility
Inverse floater
Box spread
47. The amount of income earned during a period per share of common stock.
Earnings per share
Look-ahead bias
Futures commission merchants (FCMs)
Current rate method
48. An activity ratio equal to the number of days in a period divided by the inventory ratio for the period; an indication of the number of days a company ties up funds in inventory.
Number of days of inventory
Liquidity
Merger
Efficient frontier
49. Costs that fluctuate with the level of production and sales.
Vested benefits
Tax loss carry forward
Valuation
Variable costs
50. The present discounted value of future cash flows: For assets - the present dis-counted value of the future net cash inflows that the asset is expected to generate; for liabilities - the present discounted value of the future net cash outflows that a
Common-size analysis
Netting
Present value (PV)
Imputation