WGU C214 Financial Management Final
(Latest Update ) Questions &
Answers 100% Correct - (Grade A)
Define Efficient Frontier - correct answer Maximizes expected return for a given level
of risk
Where would a risk averse investor fall on the efficient frontier? - correct answer
100% Bonds
Where would a risk-taking investor fall on the efficient frontier? - correct answer
100% Stocks
What is a Beta? - correct answer A Measure of Risk - A Beta 1 is the average risk of all
stocks. Anytime a beta is below 1, it is less risk. If it is more than 1, it is high risk.
Define efficient market hypothesis as it relates to a firm? - correct answer For any
company to survive, they need to make profitable decisions. Otherwise, investors will
shun their business. The firm needs to invest where the return is more than the cost.
What is the intrinsic value of a stock under efficient market hypothesis? - correct
answer The intrinsic value of stock is the present value of the stock's after tax net
cash flows.
, Whenever the question states that dividend was paid recently or was just paid, what
must be calculated first? - correct answer Expected Dividend
For every Bond question, what must be entered? - correct answer FV must be entered
as 1000
PMT must be entered as 1000 x Coupon Rate
What is Capital Budgeting? - correct answer Refers to long term investment decision
making.
Refers to the process used in making investment decisions involving projects that
generate cash flows over a multi-year horizon.
What information is needed for capital budgeting? - correct answer Initial Outlay
(How much money the company is going to invest in the company right now)
Differential Annual Cash Flows
(Cash flow that the project will generate year after year)
Terminal Cash Flow
(Cash flow generated at the end of the project)
Define NPV? - correct answer Net Present Value method is the method that is
universally used by companies to evaluate long term investment decisions.
NPV is defined as the present value of after-tax net tax flows and is most common
used method in capital budgeting.
The Net Present value should be positive in order for a company to proceed with an
investment. If it is negative, the company should not proceed.
(Latest Update ) Questions &
Answers 100% Correct - (Grade A)
Define Efficient Frontier - correct answer Maximizes expected return for a given level
of risk
Where would a risk averse investor fall on the efficient frontier? - correct answer
100% Bonds
Where would a risk-taking investor fall on the efficient frontier? - correct answer
100% Stocks
What is a Beta? - correct answer A Measure of Risk - A Beta 1 is the average risk of all
stocks. Anytime a beta is below 1, it is less risk. If it is more than 1, it is high risk.
Define efficient market hypothesis as it relates to a firm? - correct answer For any
company to survive, they need to make profitable decisions. Otherwise, investors will
shun their business. The firm needs to invest where the return is more than the cost.
What is the intrinsic value of a stock under efficient market hypothesis? - correct
answer The intrinsic value of stock is the present value of the stock's after tax net
cash flows.
, Whenever the question states that dividend was paid recently or was just paid, what
must be calculated first? - correct answer Expected Dividend
For every Bond question, what must be entered? - correct answer FV must be entered
as 1000
PMT must be entered as 1000 x Coupon Rate
What is Capital Budgeting? - correct answer Refers to long term investment decision
making.
Refers to the process used in making investment decisions involving projects that
generate cash flows over a multi-year horizon.
What information is needed for capital budgeting? - correct answer Initial Outlay
(How much money the company is going to invest in the company right now)
Differential Annual Cash Flows
(Cash flow that the project will generate year after year)
Terminal Cash Flow
(Cash flow generated at the end of the project)
Define NPV? - correct answer Net Present Value method is the method that is
universally used by companies to evaluate long term investment decisions.
NPV is defined as the present value of after-tax net tax flows and is most common
used method in capital budgeting.
The Net Present value should be positive in order for a company to proceed with an
investment. If it is negative, the company should not proceed.
