Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CFA > Secret Sauce > Flashcards

Secret Sauce Flashcards

You may prefer our related Brainscape-certified flashcards:
CFA flashcards
1
Q

Ordinary annuity

A

Cash flows occur at the end of each compounding period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Annuity due

A

Cash flows occur at the beginning of each period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Which return best measure manager’s performance?

A

Time-weighted return

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Kurtosis of normal distribution

A

3

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Excess kurtosis

A

Kurtosis excess of that of normal distribution (3)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Leptokurtic

A

Positive excess kurtosis, more peaked at center

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Platykurtic

A

Negative excess kurtosis, flatter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Total probability rule

A

P(Y) = P(Y|X) * P(X) + P(Y|Xc) * P(Xc)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Probability of r successes in n trials of binomial distribution, with each independent trial has p probability of success

A

nCr * p^r * (1-p)^(n-r)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Continuously compounded returns

A

Increase compounding periods to infinity.

CCRS = ln(1 + HPR)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Historical simulation

A

Randomly selecting changes in prices or risk factors from historical past changes.
Result have limitations since future changes may not be necessarily be distributed as past changes are

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Monte Carlo simulation

A

Making assumptions about distributions of prices or risk factors and using a large number of random numbers for the risk factors to generate a distribution of possible outcomes.
Can only be as accurate as the assumption about the distribution and correlation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Stratified random sampling

A

Take a random sample from each group

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Student’s t-distribution

A

Apply for small samples (n<30)
DOF, (n-1) defines the distribution
t-distribution is fatter tail than normal distribution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Bar chart

A

Vertical lines from high to low price. Mark on the left of the line indicates opening price, mark on the right indicates closing price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Candlestick chart

A

Bar char that draw a box from opening price to closing price. Box is empty is close is higher than open, filled if close is lower than open

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Change in polarity principle

A

Breached support levels become resistance levels, and breached resistance levels become support levels

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Overbought and oversold market

A

Overbought, prices have increased too rapidly and are likely to decrease in the near term
Oversold, prices have decreased too rapidly and are likely to increase in the near term

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Short interest ratio

A

High short interest ratio indicates bearish market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Kondratieff wave

A

54 year cycle

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Elliott wave theory

A

In an uptrend the upward moves in prices consist of five waves and downward moves occur in three waves.
Vice versa for downtrend

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Factor market

A

markets for factors of production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Substitution effect

A

It is the change in consumption due tot he change in relative prices. It is always positive. Shifts along the indifference curve

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Income effect

A

Might be positive of negative depending on whether the good is a normal good or inferior good. Move to another indifference curve

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Giffen good

A

Decrease in price results in a decrease of quantity demanded

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Economic rent

A

Payment to a factor of production in excess of the amount necessary to retain it in its current use.

Payment for land is all economic profit because land is totally fixed.
If a supply is perfectly elastic, then there is no economic rent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Profit maximization

A

Produce at MP1/P1 = MP2/P2

Or MRP1/P1 = 1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Is it possible that monopoly have zero economic profit?

A

Yes, maybe they need to spend to preserve monopoly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Limitation on concentration measure

A

Barriers to entry are not considered

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Supply curve for different market structure

A

For perfect competition, it is MC above AVC or ATC

For monopolistic competition, oligopoly, and monopoly, they do not have well defined supply curves

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

N-firm concentration ratio

A

Sum of the percentage market of the largest N firms in the market

32
Q

Herfindahl-Hirschman Index (HHI)

A

Sum of the squares of the market shares of the largest firms in the market. Accounts for merges

33
Q

Kinked demand curve model

A

Based on an assumption that a firm’s competitors will not follow a price increase but will follow price decrease.
Thus demand is more elastic above current price and less elastic below current price

34
Q

Cournot model

A

Assumes that the firms in a two-firm oligopoly have identical cost structures and react only to the price charged by the other firm in the prior period

35
Q

Dominant firm model

A

One firm is assumed to have the lowest cost structure and a significant portion of the market. Dominant firm set the price for the industry and competitors set their output quantities taking price as given

36
Q

GDP, income approach

A

Total income earned by households and businesses in the country during a period

37
Q

Expenditure approach

A

Total amount spent on good and services produced in the country during a time period

38
Q

Sum-of-value-added method

A

Under the expenditure approach of GDP calculation.

Summing the addition to value created at each stage of product and distribution

39
Q

Value-of-final-output method

A

Under the expenditure approach of GDP calculation.

Summing the values of all final goods and services produced during the period

40
Q

GDP deflator

A

A price index that can be used to convert nominal GDP into real GDP by removing the effects of change in price

41
Q

Four components of GDP

A

GDP = C + I + G + (X-M)

42
Q

Underemployed

A

A person who is employed part time but would prefer to work full time. A person employed at a low-paying job despite being qualified for a significantly higher-paying one

43
Q

Discouraged workers

A

Those who are available for work but are neither employed nor seeking for employment. It cause unemployment to be a lagging indicator of the business cycle.

Early in expansion when hiring begin to improve, number of discourage worker re-enter the labor force is greater than the number hired, thus increase unemployment rate although employment is expanding.

44
Q

Laspeyres price index

A

Based on the cost of a specific basket of goods and services that represents actual consumption in a base period

45
Q

Paasche price index

A

Use current consumption weights for the basket of good and services for both periods

46
Q

Fisher price index

A

Geometric mean of Laspeyres index and Paasche index. Term as “chained index”

47
Q

Cost-push inflation

A

Results from a decrease in aggregate supply caused by an increase in the real price of an important factor of production, such as labor or energy.

48
Q

Demand-pull infaltion

A

Results from persistent increase in aggregate demand, which increase price level. Could result from expansionary fiscal policy.

49
Q

Non-accelerating inflation rate of unemployment (NAIRU)

A

Unemployment rate below which upward pressure on wages is likely to develop

50
Q

Factors that influence money demand

A

Transaction demand
Precautionary demand, to meet unforeseen future needs
Speculative demand, to take advantage of investment opportunities

51
Q

Real trend rate

A

Long term sustainable real growth rate of an economy

52
Q

Neutral interest rate

A

Sum of real trend rate and target inflation

53
Q

Absolute advantage

A

If a country can produce the good at a lower cost

54
Q

Comparative advantage

A

If it can produce a good at a lower opportunity cost of producing another good

55
Q

International Monetary Fund (IMF)

A

Facilitates trade by promoting international monetary cooperation and exchange rate stability. Make resources available to member countries with balance of payment problems

56
Q

World Bank

A

Provide low-interest rate loans, interest-free credits for developing countries. Fight poverty

57
Q

World Trade Organization (WTO)

A

Goal: ensure trade flows freely and works smoothly. Focus on instituting, interpreting, and enforcing a number of multilateral trade agreements.

58
Q

Absorption approach

A

National income must increase relative to national expenditure in order to decrease a trade deficit

59
Q

Unqualified opinion

A

Auditor believes that the statements are free from material omissions and errors

60
Q

Qualified opionion

A

There is an exception in the audit statement

61
Q

Adverse opinion

A

The audit are not presented fairly or are materially nonconforming with GAAP

62
Q

Disclaimer of opinion (audit)

A

Auditor is unable to express an opinion

63
Q

Retained earnings

A

Cumulative income that has not been distributed as dividends

64
Q

Equity components

A
  • Capital, par value of common stock
  • Additional paid-in capital,
  • Retained earnings
  • Other comprehensive income
65
Q

Express expand form of accounting equation

A 
Assets = Liabilities + Equity
Assets = Liabilities + contributed capital + ending retained earnings
Assets = Liabilities + contributed capital + beginning retained earnings + revenue - expenses - dividends
66
Q

Ending retained earning and beginning

A

Ending = beginning retained earnings + revenue - expenses - dividends

67
Q

Accrued expenses

A

The firm owes cash for expenses it has incurred. It is a liability

68
Q

Barrier to developing one universally accepted accounting standard

A
  • Standard setting bodies and regulatory authorities disagree on what the best treatment of item is
  • Political pressures that regulatory bodies face from business groups who will be affected by change in the standard
69
Q

Two fundamental characteristics to make financial information useful

A

Relevance

Faithful representation

70
Q

Four characteristics enhance relevance and faithful representation

A

Comparability
Verifiability
Timeliness
Understandability

71
Q

Income statement preparation equation

A

Net income = revenue - expenses

72
Q

Barter transaction

A

Two party exchange good/services without cash payment.

Under GAAP, revenue can be recognized at fair value only if the firm has historically received cash payments and can use historical experience to determine fair value.

Under IFRS, revenue must be measured based on the fair value of similar non-barter transaction with unrelated parties

73
Q

Items that are excleded from the income statement that affect owner’s equity

A
  • Transaction with owners (issuing stock)

- Other comprehensive income statement

74
Q

Goodwill

A

Created when a business is purchased for more than the fair value of its assets net of liabilities

Goodwill is not amortized, but must be tested for impairment at least annually

75
Q

Treasury stock

A

Stock that has been reacquired by the firm but not yet retired. Treasury stock has no voting rights and does not receive dividends

CFA (11 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions