WGU D775 OA (Objective Assessment) | Introduction to Business Finance | Questions and Correct Answers plus Rationale | New 2026/2027 Update

WGU D775 OA (Objective Assessment) | Introduction
to Business Finance | Questions and Correct Answers
plus Rationale | New 2026/2027 Update


SECTION A: SECURITIES & EQUITY


Question 1
What is common stock?
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A. A debt instrument with fixed interest payments

• ☑
B. A share of ownership in a firm with voting rights
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C. A type of bond issued by the government
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D. A short-term investment vehicle
Correct Answer: B — A share of ownership in a firm with voting rights
Rationale: Common stock represents a share of ownership in a corporation and
typically carries voting rights. Common stockholders have the right to vote on
corporate matters (such as electing the board of directors) and may receive
dividends. Common stockholders are residual claimants, meaning they are paid
after creditors and preferred stockholders in the event of liquidation.


Question 2
What is a characteristic of preferred stock?

, • □
A. Voting rights
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B. Variable dividends

• ☑
C. Fixed dividends
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D. No claim on assets
Correct Answer: C — Fixed dividends
Rationale: Preferred stock typically pays fixed dividends, similar to interest
payments on bonds. Preferred stockholders receive dividends before common
stockholders and have a higher claim on assets in liquidation. However, preferred
stock generally does not carry voting rights. The fixed dividend feature makes
preferred stock a hybrid security with characteristics of both equity and debt.


Question 3
What is the purpose of bonds from the perspective of issuers?
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A. To distribute profits to shareholders
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B. To provide voting rights to investors

• ☑
C. To raise capital without diluting ownership
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D. To reduce taxable income

,Correct Answer: C — To raise capital without diluting ownership
Rationale: Bonds allow issuers to raise capital without diluting existing ownership.
Unlike issuing stock (which creates new shares and dilutes existing shareholders),
bonds are debt instruments that do not affect ownership structure. Bondholders
are creditors, not owners, and do not have voting rights. Issuers pay interest on
bonds but retain full control of the company.


Question 4
Which type of bonds are considered junk bonds?
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A. Investment-grade bonds

• ☑
B. Speculative bonds
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C. Government bonds
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D. Convertible bonds
Correct Answer: B — Speculative bonds
Rationale: Junk bonds are speculative bonds rated below investment grade (BB+
or lower by S&P). They carry higher default risk and offer higher yields to
compensate investors. Investment-grade bonds (A) are higher quality.
Government bonds (C) are generally considered low-risk. Convertible bonds (D)
can be converted into stock and are not specifically junk bonds.


Question 5
Which type of investment vehicle is uniquely used for retirement savings?
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, A. Mutual funds
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B. Exchange-traded funds (ETFs)

• ☑
C. 401k plans
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D. Hedge funds
Correct Answer: C — 401k plans
Rationale: 401k plans are employer-sponsored retirement savings plans uniquely
designed for retirement savings. They offer tax advantages, including pre-tax
contributions and tax-deferred growth. Mutual funds (A), ETFs (B), and hedge
funds (D) are investment vehicles that can be used for retirement but are not
uniquely designed for retirement savings like 401k plans.


Question 6
What is true about options in financial derivatives?
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A. They obligate the buyer to purchase the asset

• ☑
B. They give the buyer the right, but not the obligation, to buy or sell an asset
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C. They are only available for commodities
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D. They have no expiration date
Correct Answer: B — They give the buyer the right, but not the obligation, to
buy or sell an asset