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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. (Aka forward rate agreement)
Interest rate forward
Long-term debt-ta-assets ratio
Vested benefit obligation
Dynamic hedging
2. A regression estimation technique that addresses heteroskedasticity of the error term.
Ratio scales
Continuous time
Generalized least squares
Current rate method
3. With respect to the application of the LIFO inventory method - the liquidation of old - relatively low-priced inventory; happens when the volume of sales rises above the volume of recent purchases so that some sales are made from relatively old - low
Cash basis
LIFO layer liquidation (LIFO liquidation)
Statistics
Trading securities (held-for-trading securities)
4. The science of describing - analyzing - and drawing conclusions from data; also - a collection of numerical data.
Due diligence
Statistics
Management buyout (MBO)
Economies of scale
5. The first date that a share trades without (i.e. - 'ex') the dividend.
Retail method
Ex-dividend date
Dealing securities
Delta-normal method
6. Probabilities that generally do not vary from person to person; includes a pri-ori and objective probabilities.
Trust receipt arrangement
Annuity due
Bottom-up analysis
Objective probabilities
7. A specifi-cation of how 'value' is to be understood in the context of a specific valuation.
Rate of return
Historical equity risk premium approach
Nonconventional cash flow
Definition of value (or standard of value)
8. The condition in a financial mar-ket in which two equivalent financial instruments or combinations of financial instruments can sell for only one price. Equivalent to the principle that no arbitrage opportunities are possible.
Manufacturing resource planning (MRP)
Equitizing cash
Law of one price
Sector neutral
9. An investment decision rule that states that an investment should be undertaken if its NPV is positive but not undertaken if its NPV is negative.
Replacement value
NPV rule
Amortization
Tree diagram
10. Ratio of sales on credit to the average balance in accounts receivable.
Rate-of-return regulation
Solvency
Accounts receivable turnover
Return on assets (ROA)
11. A country that is borrowing more from the rest of the world than it is lending to it.
Deep out of the money
Frequency distribution
Number of days of inventory
Net borrower
12. Events such that only one can occur at a time.
First-differencing
Mutually exclusive events
Net profit margin (profit margin or return on sales)
Return on common equity (ROCE)
13. The rule that the joint probability of events A and B equals the probability of A given B times the probability of B.
Initial public offering (IPO)
Multiplication rule for probabilities
Private sector surplus or deficit
Justified (fundamental)
14. The use of inven-tory as collateral for a loan; similar to a trust receipt arrangement except there is a third party (i.e. - a warehouse company) that supervises the inventory.
Bond-equivalent yield
Liquidity
Warehouse receipt arrangement
Parameter instability
15. A valuation ratio calculated as price per share divided by sales per share.
Replacement value
Passive strategy
Receivables turnover
Price to sales
16. Method used to estimate the overall capitalization rate by dividing the sale price of a comparable income property into the net operating income.
Upstream
Quantile (or fractile)
Market-extraction method
Interest rate
17. Stan-dard errors of the estimated parameters of a regression that correct for the presence of het-eroskedasticity in the regression's error term.
Segment ROA
Before-tax cash flow
Exhaustive
Heteroskedasticity-consistent standard errors
18. The stage of growth between the growth phase and the mature phase of a company in which earnings growth typically slows.
Transition phase
American option
Caplet
Top-down investing
19. The contribution to active risk squared resulting from the portfolio's different-than-benchmark exposures relative to factors specified in the risk model.
Active factor risk
Regression coefficients
Risk premium
Discrete time
20. The fair value of the estimated costs to be incurred at the end of a tangible asset's service life. The fair value of the liability is determined on the basis of discounted cash flows.
Capital budgeting
Asset purchase
Residual autocorrelations
Asset retirement obligations (AROs)
21. With reference to equity investors - investors who are focused on paying a relatively low share price in relation to earnings or assets per share.
Expanded
Log-log regression model
Value investors
Foreign exchange market
22. The market in which the currency of one country is exchanged for the cur-rency of another.
Foreign exchange market
Nominal exchange rate
Operating return on assets (operating
Backtesting
23. The day that the corporation issues a statement d eclaring a specific dividend.
Declaration date
Accounting risk
Pyramiding
Lack of marketability discount
24. An option strategy that is equiva-lent to a short butterfly spread.
Acquiring company - or acquirer
Sandwich spread
Frequency distribution
Hedge ratio
25. A balance sheet that does not show subtotals for current assets and current liabilities.
Breakeven point
Unclassified balance sheet
Gains
Rate of return
26. An agreement between two parties in which one party - the buyer - agrees to buy from the other party - the seller - an underlying asset at a later date for a price established at the start of the contract.
Capital structure
Due diligence
Forward contract
Stated annual interest rate or quoted interest rate
27. The market for short-term debt instruments (one-year maturity or less).
Negative serial correlation
Money market
Estimate
Out-of-sample forecast errors
28. 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.
Short
Spin-off
Liruit down
Net operating assets
29. Differences between tax and financial reporting of revenue (expenses) that will not be reversed at some future date. These result in a difference between the company's effective tax rate and statutory tax rate and do not result in a deferred tax item
Segment ROA
Put-call-forward parity
Permanent differences
Bottom-up analysis
30. An option on the yield spread on a bond.
Intrinsic value or exercise value
Credit spread option
Model risk
Day trader
31. A hypothesis concern-ing pricing behavior that holds that even though there are only a few firms in an industry - they are forced to price their products more or less com-petitively because of the ease of entry by outsiders. The key aspect of a conte
Look-ahead bias
Theory of contestable markets
Crawling peg
Reverse stock split
32. A varia-tion ofVAR that reflects credit risk.
Continuously compounded return
Credit VAR - default VAR - or credit at risk
Working capital
Point of sale
33. 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
Matching principle
Unidentifiable intangible
Projected benefit obligation
Trading securities (held-for-trading securities)
34. Futures contracts in which the underlying is a stock - bond - or currency.
Financial futures
After-tax equity reversion (ATER)
Bull spread
Externality
35. An investment where the investor exerts control over the investee - typically by having a greater than 50 percent ownership in the investee.
Adjusted present value (APV)
Real options
Controlling interest
ackwardation
36. ID) With respect to random variables - the property of ran-dom variables that are independent of each otherbut follow the identical probability distribution.
Debt with warrants
Day trader
Independent and identically distributed (l
Residual autocorrelations
37. An option in which the underly-ing is an interest rate.
One third rule
Lessee
Exposure to foreign exchange risk
Interest rate option
38. The market price of an asset or lia-bility that trades regularly.
Fair market value
Ex-dividend date
Upstream
Double taxation
39. Systems that capture transaction data at the physical location in which the sale is made.
Point of sale
Debit
Dividend discount model (DDM)
Probit model
40. A solvency ratio calculated as total debt divided by total debt plus total share-holders ' equi ty.
Debt-to-capital ratio
Error term
Earnings management activity
Top-down investing
41. An option in which the underlying value equals the exercise price.
Residual claim
Imputation
Bottom-up investing
At the money
42. Segment liabilities divided by segment assets.
Segment debt ratio
Control premium
Capital allocation line (CAL)
Return on common equity (ROCE)
43. A person or country has a comparative advantage in an activi ty if that person or country can perform the activity at a lower opportunity cost than anyone else or any other country.
Convertible debt
Straight-line method
Comparative advantage
Commercial paper
44. The assumption of equal priorprobabilities.
Active risk squared
Balance-sheet-based aggregate accruals
Diffuse prior
Write-down
45. 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.
Time-period bias
Dividend payout policy
Purchase method
Straddle
46. 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
Price to sales
Bottom-up analysis
Discrete random variable
Macaulay duration
47. An estimate of the country spread (country equity premium) for a develop-ing nation that is based on a comparison of bonds yields in country being analyzed and a developed country. The sovereign yield spread is the differ-ence between a government bo
Securities offering
Ex-dividend
Sovereign yield spread
Indexing
48. With the accounting systems - a formal record of increases and decreases in a specific asset - liability - component of owners' equity - rev-enue - or expense.
Account
Revaluation
Brokerage
Swaption
49. An amount or percent-age deducted from the pro rata share of 100 per-cent of the value of an equity interest in a business to reflect the absence of some or all of the powers of control.
Real risk-free interest rate
Degree of financial leverage (DFL)
Posterior probability
Discount for lack of control
50. Financial statements that are not accompanied by an auditor's opinion letter.
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