Exam (elaborations)
CFA Level 1. Vocab Questions and Answers 2024
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Exam of 10 pages for the course CFA at CFA (CFA Level 1. Vocab)
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CFA Level 1. VocabA priori probability - answer A probability based on logical analysis rather than on
observation or personal judgment.
Abnormal return - answer The amount by which a security's actual return differs from its
expected return, given the security's risk and the market's return.
Absolute advantage - answer A country's ability to produce a good or service at a lower
absolute cost than its trading partner.
Absolute dispersion - answer The amount of variability present without comparison to
any reference point or benchmark.
Absolute frequency - answer The number of observations in a given interval (for
grouped data).
Accelerated book build - answering offering of securities by an investment bank acting
as principal that is accomplished in only one or two days.
Accelerated methods - answerDepreciation methods that allocate a relatively large
proportion of the cost of an asset to the early years of the asset's useful life.
Accounting costs - answerMonetary value of economic resources used in performing an
activity. These can be explicit, out-of-pocket, current payments, or an allocation of
historical payments (depreciation) for resources. They do not include implicit opportunity
costs.
Accounting profit - answerincome before taxes or pretax income.
Accounts receivable turnover - answerRatio of sales on credit to the average balance in
accounts receivable.
Accrued expenses - answeraccrued liabilities; Liabilities related to expenses that have
been incurred but not yet paid as of the end of an accounting period
Acid-test ratio - answerA stringent measure of liquidity that indicates a company's ability
to satisfy current liabilities with its most liquid assets, calculated as (cash + short-term
marketable investments + receivables) divided by current liabilities.
, Accumulated depreciation - answerAn offset to property, plant, and equipment (PPE)
reflecting the amount of the cost of PPE that has been allocated to current and previous
accounting periods.
Acquisition method - answerA method of accounting for a business combination where
the acquirer is required to measure each identifiable asset and liability at fair value. This
method was the result of a joint project of the IASB and FASB aiming at convergence in
standards for the accounting of business combinations.
Action lag - answerDelay from policy decisions to implementation.
Active investment - answerAn approach to investing in which the investor seeks to
outperform a given benchmark.
Active return - answerThe return on a portfolio minus the return on the portfolio's
benchmark.
Active strategy - answerIn reference to short-term cash management, an investment
strategy characterized by monitoring and attempting to capitalize on market conditions
to optimize the risk and return relationship of short-term investments.
Activity ratio - answerThe ratio of the labor force to total population of working age. Also
called participation ratio.
Activity ratios - answerRatios that measure how efficiently a company performs day-to-
day tasks, such as the collection of receivables and management of inventory. Also
called asset utilization ratios or operating efficiency ratios
Add-on rates - answerBank certificates of deposit, repos, and indices such as Libor and
Euribor are quoted on an add-on rate basis (bond equivalent yield basis).
Addition rule for probabilities - answerA principle stating that the probability that A or B
occurs (both occur) equals the probability that A occurs, plus the probability that B
occurs, minus the probability that both A and B occur.
Agency RMBS - answerIn the United States, securities backed by residential mortgage
loans and guaranteed by a federal agency or guaranteed by either of the two GSEs
(Fannie Mae and Freddie Mac).
Aggregate demand - answerThe quantity of goods and services that households,
businesses, government, and foreign customers want to buy at any given level of
prices.
Aggregate demand curve - answerInverse relationship between the price level and real
output.
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