D775 WGU Section 1 UPDATED ACTUAL Questions and
CORRECT Answers
Personal Finance Managing individual or household financial activities
Public Finance Managing a government's revenues, expenditures, and debt
Business Finance Managing a company's financial activities and strategies
Capital Appreciation when a stock is bought at a lower price than what it is sold at.
Preferred stocks provide more stability with fixed dividends and higher priority in asset claims but
usually lack voting rights, offering less control over corporate governance.
Common stocks offer the potential for higher returns and voting rights but come with greater risk
due to their lower priority in claims on assets.
Common stock represents ownership with voting rights and variable dividloans
that various entities (like businesses, governments, or individuals) issue, or sell, to
raise capital.ends,
Bonds loans that various entities (like businesses, governments, or individuals) issue, or
sell, to raise capital.
maturity a specific date when the last coupon is due along with the original face value of
the bond
junk bonds/ speculative bonds high-risk, and investors hope to earn a relatively higher return due to that risk.
Corporate Bonds Issued by firms to finance operations, expansions, and other business activities.
Typically carries higher yields due to higher risk
public bonds: Issued by government groups. There are two main kinds municipal and treasury.
Municipal Bonds / munis Issued by states or local governments and municipalities fund public projects, like
infrastructure such as public roads, hospitals, parks, and fire departments.
Treasury bonds / treasuries When firms have extra cash sitting in their account- short-term, non-risky
investments for the cash.
How do companies raise capital through debt and equity Companies can issue bonds (debt financing), which must be repaid with interest,
financing? or sell stock (equity financing), which gives ownership to investors but does not
require repayment.
Financial derivatives They derive their value from the performance of underlying assets, indexes, or
rates.
, Options financial contracts that give the buyer the right, but not the obligation, to buy or
sell an asset at a predetermined price, known as the “strike price,” before a
specified date
Futures standardized contracts obligating the buyer to purchase or the seller to sell an
asset at a predetermined price on a specified future date.
Mutual Funds typically open-end investment companies that issue shares to the public and are
priced daily based on their net asset value (NAV
Exchange-traded funds trade on stock exchanges like individual stocks and can be bought and sold
throughout the trading day
Hedge Funds private investment partnerships for accredited investors that employ diverse
strategies to generate high returns, often with higher risk
Pension Funds large pools of capital collected from employees for retirement savings, managed
to ensure growth and sustainability of the fund.
Public Markets buying and selling of securities, such as stocks and bonds, on organized
exchanges where the general public can participate
Private Markets transactions of equity, debt, or other securities that are not publicly traded,
typically involving institutional investors, private equity firms, venture capitalists,
and accredited individual investors
NYSE known for its strictest listing requirements and auction-based trading,
NASDAQ recognized for its electronic trading platform and focus on technology stocks.
Regulators oversee these exchanges to maintain fair, efficient, and transparent market
Securities and Exchange Commission (SEC regulates securities markets, enforcing laws to protect investors and maintain
orderly functioning
Commodity Futures Trading Commission (CFTC) Oversees futures and options markets, ensuring they operate free from fraud and
manipulation.
IPO when a company sells shares to the public for the first time.
Why use IPO raise capital, expand operations, and increase their market presence.
Primary Markets where new securities are issued and sold for the first time.
Secondary Markets where existing securities are traded among investors. Provides liquidity, enabling
investors to buy and sell securities without the need for the issuing firm's
involvement. NYSE and NASDAQ
Dealer Markets transactions are facilitated by market makers, or dealers, who buy and sell
securities for their own accounts; NASDAQ
CORRECT Answers
Personal Finance Managing individual or household financial activities
Public Finance Managing a government's revenues, expenditures, and debt
Business Finance Managing a company's financial activities and strategies
Capital Appreciation when a stock is bought at a lower price than what it is sold at.
Preferred stocks provide more stability with fixed dividends and higher priority in asset claims but
usually lack voting rights, offering less control over corporate governance.
Common stocks offer the potential for higher returns and voting rights but come with greater risk
due to their lower priority in claims on assets.
Common stock represents ownership with voting rights and variable dividloans
that various entities (like businesses, governments, or individuals) issue, or sell, to
raise capital.ends,
Bonds loans that various entities (like businesses, governments, or individuals) issue, or
sell, to raise capital.
maturity a specific date when the last coupon is due along with the original face value of
the bond
junk bonds/ speculative bonds high-risk, and investors hope to earn a relatively higher return due to that risk.
Corporate Bonds Issued by firms to finance operations, expansions, and other business activities.
Typically carries higher yields due to higher risk
public bonds: Issued by government groups. There are two main kinds municipal and treasury.
Municipal Bonds / munis Issued by states or local governments and municipalities fund public projects, like
infrastructure such as public roads, hospitals, parks, and fire departments.
Treasury bonds / treasuries When firms have extra cash sitting in their account- short-term, non-risky
investments for the cash.
How do companies raise capital through debt and equity Companies can issue bonds (debt financing), which must be repaid with interest,
financing? or sell stock (equity financing), which gives ownership to investors but does not
require repayment.
Financial derivatives They derive their value from the performance of underlying assets, indexes, or
rates.
, Options financial contracts that give the buyer the right, but not the obligation, to buy or
sell an asset at a predetermined price, known as the “strike price,” before a
specified date
Futures standardized contracts obligating the buyer to purchase or the seller to sell an
asset at a predetermined price on a specified future date.
Mutual Funds typically open-end investment companies that issue shares to the public and are
priced daily based on their net asset value (NAV
Exchange-traded funds trade on stock exchanges like individual stocks and can be bought and sold
throughout the trading day
Hedge Funds private investment partnerships for accredited investors that employ diverse
strategies to generate high returns, often with higher risk
Pension Funds large pools of capital collected from employees for retirement savings, managed
to ensure growth and sustainability of the fund.
Public Markets buying and selling of securities, such as stocks and bonds, on organized
exchanges where the general public can participate
Private Markets transactions of equity, debt, or other securities that are not publicly traded,
typically involving institutional investors, private equity firms, venture capitalists,
and accredited individual investors
NYSE known for its strictest listing requirements and auction-based trading,
NASDAQ recognized for its electronic trading platform and focus on technology stocks.
Regulators oversee these exchanges to maintain fair, efficient, and transparent market
Securities and Exchange Commission (SEC regulates securities markets, enforcing laws to protect investors and maintain
orderly functioning
Commodity Futures Trading Commission (CFTC) Oversees futures and options markets, ensuring they operate free from fraud and
manipulation.
IPO when a company sells shares to the public for the first time.
Why use IPO raise capital, expand operations, and increase their market presence.
Primary Markets where new securities are issued and sold for the first time.
Secondary Markets where existing securities are traded among investors. Provides liquidity, enabling
investors to buy and sell securities without the need for the issuing firm's
involvement. NYSE and NASDAQ
Dealer Markets transactions are facilitated by market makers, or dealers, who buy and sell
securities for their own accounts; NASDAQ
