Western Governors University
6 2 0 2 AO • 4 1 2 C
★ ★
WGU Michael O. Leavitt School of Business
A NEW KIND OF U.
EST. 1997
C214 — Financial Management: Pass the OA
2 0 2 6 U P D AT E · CO M P R E H E N S I V E Q U E ST I O N S & V E R I F I E D A N S W E R S · G R A D E A + ! !
INSTITUTION Western Governors University COURSE CODE C214
PROGRAM BS Business Administration · Finance ACADEMIC YEAR
Concentration
EXAM TITLE Financial Management — Objective TOTAL QUESTIONS 50 Questions
Assessment Preparation
COURSE TITLE Financial Management · Valuation · Capital FORMAT Multiple Choice / True-False — Select the
Budgeting · Markets Single Best Answer
STUDY GUIDE INSTRUCTIONS
▸ Questions cover stocks, bonds, financial statements, capital budgeting, regulatory acts, and valuation methods.
▸ Select the single best answer for each question based on the WGU C214 Financial Management curriculum.
▸ True/False questions require precise knowledge of financial principles and regulatory frameworks.
▸ Correct answers and detailed rationales appear below each question for comprehensive OA preparation.
STOCKS · BONDS · FINANCIAL STATEMENTS · CAPITAL BUDGETING · Questions 1
REGULATORY ACTS · VALUATION – 50
1. Which of the following is a characteristic of preferred stock?
A. Voting rights in corporate governance
B. Dividends in arrears and cumulative dividends
C. Fixed maturity date
D. Higher payoff claim than bonds in bankruptcy
CORRECT ANSWER B. Dividends in arrears and cumulative dividends
RATIONALE Preferred stock has cumulative dividends (unpaid dividends accumulate as arrears), no voting rights, no fixed
maturity date, and is considered a hybrid security (part stock/part bond). In bankruptcy, preferred stockholders
have a higher claim than common stockholders but lower than bondholders. Preferred stock dividends are fixed
and do not change year after year.
, 2. Which type of security has voting rights?
A. Preferred stock
B. Corporate bonds
C. Common stock
D. Treasury bonds
CORRECT ANSWER C. Common stock
RATIONALE Common stockholders have voting rights in corporate governance, including electing the board of directors.
Preferred stockholders typically do not have voting rights. Bondholders are creditors, not owners, and have no
voting rights. This is a fundamental distinction between common stock and other securities.
3. One thing common stock and preferred stock have in common is:
A. Voting rights
B. Fixed dividends
C. No maturity date
D. Priority claim in bankruptcy
CORRECT ANSWER C. No maturity date
RATIONALE Both common stock and preferred stock are equity instruments with no maturity date—they exist perpetually.
They differ in voting rights (common has them, preferred does not), dividend structure (preferred is fixed,
common is variable), and bankruptcy priority (preferred ranks above common). The perpetual nature is their
shared characteristic.
4. What is true regarding bonds?
A. Coupon rate changes with market interest rates
B. When the bond matures, the bondholder gets the lump sum back
C. PAR value is typically $500
D. Maturity is calculated in months
CORRECT ANSWER B. When the bond matures, the bondholder gets the lump sum back
RATIONALE At maturity, the bondholder receives the face (PAR) value—typically $1,000—as a lump sum repayment of
principal. The coupon rate is fixed and does NOT change with market rates. Maturity is measured in years, not
months. Future Value equals PAR value, typically $1,000. These are fundamental bond characteristics.
5. A bond sells at face value when:
A. The required rate of return is greater than the coupon rate
B. The required rate of return is less than the coupon rate
C. The required rate of return is equal to the coupon rate
D. The bond is a junk bond
CORRECT ANSWER C. The required rate of return is equal to the coupon rate
RATIONALE When the market's required rate of return equals the bond's coupon rate, the bond sells at PAR (face value). If the
required return is higher than the coupon, the bond sells at a discount. If lower, it sells at a premium. This
relationship is fundamental to bond pricing.
6 2 0 2 AO • 4 1 2 C
★ ★
WGU Michael O. Leavitt School of Business
A NEW KIND OF U.
EST. 1997
C214 — Financial Management: Pass the OA
2 0 2 6 U P D AT E · CO M P R E H E N S I V E Q U E ST I O N S & V E R I F I E D A N S W E R S · G R A D E A + ! !
INSTITUTION Western Governors University COURSE CODE C214
PROGRAM BS Business Administration · Finance ACADEMIC YEAR
Concentration
EXAM TITLE Financial Management — Objective TOTAL QUESTIONS 50 Questions
Assessment Preparation
COURSE TITLE Financial Management · Valuation · Capital FORMAT Multiple Choice / True-False — Select the
Budgeting · Markets Single Best Answer
STUDY GUIDE INSTRUCTIONS
▸ Questions cover stocks, bonds, financial statements, capital budgeting, regulatory acts, and valuation methods.
▸ Select the single best answer for each question based on the WGU C214 Financial Management curriculum.
▸ True/False questions require precise knowledge of financial principles and regulatory frameworks.
▸ Correct answers and detailed rationales appear below each question for comprehensive OA preparation.
STOCKS · BONDS · FINANCIAL STATEMENTS · CAPITAL BUDGETING · Questions 1
REGULATORY ACTS · VALUATION – 50
1. Which of the following is a characteristic of preferred stock?
A. Voting rights in corporate governance
B. Dividends in arrears and cumulative dividends
C. Fixed maturity date
D. Higher payoff claim than bonds in bankruptcy
CORRECT ANSWER B. Dividends in arrears and cumulative dividends
RATIONALE Preferred stock has cumulative dividends (unpaid dividends accumulate as arrears), no voting rights, no fixed
maturity date, and is considered a hybrid security (part stock/part bond). In bankruptcy, preferred stockholders
have a higher claim than common stockholders but lower than bondholders. Preferred stock dividends are fixed
and do not change year after year.
, 2. Which type of security has voting rights?
A. Preferred stock
B. Corporate bonds
C. Common stock
D. Treasury bonds
CORRECT ANSWER C. Common stock
RATIONALE Common stockholders have voting rights in corporate governance, including electing the board of directors.
Preferred stockholders typically do not have voting rights. Bondholders are creditors, not owners, and have no
voting rights. This is a fundamental distinction between common stock and other securities.
3. One thing common stock and preferred stock have in common is:
A. Voting rights
B. Fixed dividends
C. No maturity date
D. Priority claim in bankruptcy
CORRECT ANSWER C. No maturity date
RATIONALE Both common stock and preferred stock are equity instruments with no maturity date—they exist perpetually.
They differ in voting rights (common has them, preferred does not), dividend structure (preferred is fixed,
common is variable), and bankruptcy priority (preferred ranks above common). The perpetual nature is their
shared characteristic.
4. What is true regarding bonds?
A. Coupon rate changes with market interest rates
B. When the bond matures, the bondholder gets the lump sum back
C. PAR value is typically $500
D. Maturity is calculated in months
CORRECT ANSWER B. When the bond matures, the bondholder gets the lump sum back
RATIONALE At maturity, the bondholder receives the face (PAR) value—typically $1,000—as a lump sum repayment of
principal. The coupon rate is fixed and does NOT change with market rates. Maturity is measured in years, not
months. Future Value equals PAR value, typically $1,000. These are fundamental bond characteristics.
5. A bond sells at face value when:
A. The required rate of return is greater than the coupon rate
B. The required rate of return is less than the coupon rate
C. The required rate of return is equal to the coupon rate
D. The bond is a junk bond
CORRECT ANSWER C. The required rate of return is equal to the coupon rate
RATIONALE When the market's required rate of return equals the bond's coupon rate, the bond sells at PAR (face value). If the
required return is higher than the coupon, the bond sells at a discount. If lower, it sells at a premium. This
relationship is fundamental to bond pricing.
