Page 1 of 153
FIN 325 EXAM LATEST UPDATE THIS YEAR (2026-
2027) ALL 300 QUESTIONS AND CORRECT
ANSWERS WITH RATIONALES
1. A forum in which suppliers and demanders of funds make financial transactions is called a
financial:
A) Institution
B) Bank
C) Instrument
D) Market
Answer: D A financial market is any forum where buyers and sellers of financial assets
(securities) trade. Financial institutions are intermediaries (banks, insurance companies),
instruments are the securities traded, and banks are one type of institution.
2. Which one of the following would be the most liquid investment?
A) Stock
B) Series EE bond
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C) Money market mutual fund
D) Real estate
Answer: C Money market mutual funds invest in highly liquid, short-term securities and offer
immediate access to funds. Stocks and bonds can be sold but may take time and incur
transaction costs, while real estate is highly illiquid.
3. Sarah purchased a stock one year ago at $32 a share. She received four quarterly dividends
of $0.75 each and sold the stock today for $38 a share. Her capital gain per share is:
A) $3.00
B) 6.00𝐶)(6.00)
D) $9.00
Answer: B Capital gain per share is calculated as the selling price minus the purchase price: $38
- $32 = $6.00 per share. Dividends are separate income, not part of the capital gain.
4. Stocks purchased in the secondary market are purchased:
A) Directly from the issuing corporation
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B) From other investors
C) From small, little-known brokerages
D) Indirectly through financial institutions
Answer: B The secondary market involves trading existing securities between investors, not
from the issuing corporation. Primary market transactions involve direct purchases from the
issuer (IPOs or seasoned offerings).
5. A rights offering is the:
A) Initial offering of securities to the public
B) Offering of new securities to current shareholders on a pro-rata basis
C) Sale of newly issued shares of stock to the general public
D) Sale of securities directly to a select group of investors
Answer: B A rights offering gives existing shareholders the right to purchase new shares in
proportion to their current ownership (pro-rata basis) before the shares are offered to the
public. This allows shareholders to maintain their ownership percentage.
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6. Market makers in dealer markets:
A) Bring sellers and buyers together by matching offers
B) Earn commissions paid by the sellers of securities
C) Buy securities at a bid price and hope to resell them at a higher offer price
D) All of the above
Answer: C Market makers in dealer markets buy securities at the bid price and sell at the higher
ask (offer) price, earning the spread. They do not earn commissions but profit from the bid-ask
spread.
7. Assume the foreign exchange rate for the euro was U.S. $1.00 = 0.91 euro last month. This
month, the exchange rate is U.S. $1.00 = 0.88 euro. This indicates that:
A) U.S. dollar remained unchanged relative to the euro
B) U.S. dollar appreciated relative to all foreign currencies
C) Euro appreciated relative to the dollar
D) Euro depreciated relative to the dollar
Answer: C When fewer euros are needed to buy one dollar (0.88 vs. 0.91), each euro is worth
more dollars. The euro appreciated (strengthened) relative to the dollar.
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FIN 325 EXAM LATEST UPDATE THIS YEAR (2026-
2027) ALL 300 QUESTIONS AND CORRECT
ANSWERS WITH RATIONALES
1. A forum in which suppliers and demanders of funds make financial transactions is called a
financial:
A) Institution
B) Bank
C) Instrument
D) Market
Answer: D A financial market is any forum where buyers and sellers of financial assets
(securities) trade. Financial institutions are intermediaries (banks, insurance companies),
instruments are the securities traded, and banks are one type of institution.
2. Which one of the following would be the most liquid investment?
A) Stock
B) Series EE bond
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, Page 2 of 153
C) Money market mutual fund
D) Real estate
Answer: C Money market mutual funds invest in highly liquid, short-term securities and offer
immediate access to funds. Stocks and bonds can be sold but may take time and incur
transaction costs, while real estate is highly illiquid.
3. Sarah purchased a stock one year ago at $32 a share. She received four quarterly dividends
of $0.75 each and sold the stock today for $38 a share. Her capital gain per share is:
A) $3.00
B) 6.00𝐶)(6.00)
D) $9.00
Answer: B Capital gain per share is calculated as the selling price minus the purchase price: $38
- $32 = $6.00 per share. Dividends are separate income, not part of the capital gain.
4. Stocks purchased in the secondary market are purchased:
A) Directly from the issuing corporation
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B) From other investors
C) From small, little-known brokerages
D) Indirectly through financial institutions
Answer: B The secondary market involves trading existing securities between investors, not
from the issuing corporation. Primary market transactions involve direct purchases from the
issuer (IPOs or seasoned offerings).
5. A rights offering is the:
A) Initial offering of securities to the public
B) Offering of new securities to current shareholders on a pro-rata basis
C) Sale of newly issued shares of stock to the general public
D) Sale of securities directly to a select group of investors
Answer: B A rights offering gives existing shareholders the right to purchase new shares in
proportion to their current ownership (pro-rata basis) before the shares are offered to the
public. This allows shareholders to maintain their ownership percentage.
3
, Page 4 of 153
6. Market makers in dealer markets:
A) Bring sellers and buyers together by matching offers
B) Earn commissions paid by the sellers of securities
C) Buy securities at a bid price and hope to resell them at a higher offer price
D) All of the above
Answer: C Market makers in dealer markets buy securities at the bid price and sell at the higher
ask (offer) price, earning the spread. They do not earn commissions but profit from the bid-ask
spread.
7. Assume the foreign exchange rate for the euro was U.S. $1.00 = 0.91 euro last month. This
month, the exchange rate is U.S. $1.00 = 0.88 euro. This indicates that:
A) U.S. dollar remained unchanged relative to the euro
B) U.S. dollar appreciated relative to all foreign currencies
C) Euro appreciated relative to the dollar
D) Euro depreciated relative to the dollar
Answer: C When fewer euros are needed to buy one dollar (0.88 vs. 0.91), each euro is worth
more dollars. The euro appreciated (strengthened) relative to the dollar.
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