WGU D076 Finance Skills for Managers: Final Exam Questions And Answers Updated 2023/2024 | Graded A+ (Verified)

What is a depository institution? - Answer An institution that accepts and pays interest on deposits of money, as well as extends loans Which financial institution ensures that a nation's economy remains healthy by controlling the amount of money circulating in the economy? - Answer Central banks control the supply of money in the economy How do insurance companies pay policyholders when a claim is made? - Answer Insurance companies invest the money that they earn from premiums into stocks and bonds, and then the returns are used to fill claims. Which type of financial institution deals mainly with providing for retirement through employers? - Answer Pension fund A large corporation is looking to merge with another large corporation. Which financial institution can help them do this? - Answer Investment banks facilitate complex financial deals, like mergers. Unemployment rate is which type of economic indicator? - Answer Lagging indicators change after the economy changes. The Federal Reserve sometimes adjusts the interest rate at which commercial banks can borrow from it. What is the purpose of adjusting the interest rate? - Answer Regulating inflation and unemployment is the main objective of the Federal Reserve and central banks, and it is accomplished by adjusting the interest rate. What would an inverted yield curve signal? - Answer An inverted yield curve reflects the expectation that the economy will have low or negative growth in the future. In what way are coincident indicators useful? - Answer They are analyzed during economic shifts to provide information about the current state of the economy. Which responsibility is a focus of the U.S. Securities and Exchange Commission? - Answer To protect investors The responsibilities of SEC are to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. Which type of financial institution provides individuals and firms access to financial markets? - Answer Investment institutions Which financial institution includes entities that receive money from institutional investors and wealthy individuals to buy troubled companies to improve them and earn returns by selling them or going public? - Answer Private equity Yield curve is which type of economic indicator? - Answer Leading About a year ago, the short-term Treasury bill had 1.54% interest and the long-term Treasury note had 2.54% interest. This week, the 1-year Treasury bill has an interest rate of 3.13%, while the 10-year Treasury note has an interest rate of 2.28%. What does this information indicate about the future economy? - Answer It may indicate an economic downturn. Which term reflects a person's beliefs about right and wrong, good and bad, or just and unjust? - Answer Moral reflects one's beliefs about right and wrong, good and bad, or just and unjust. What characterizes an ethical action? - Answer An ethical action is based on accepted standards of conduct. Lucas is a financial advisor working for Bullzai, Inc. He is faced with a dilemma. Bullzai has started changing its practices in order to increase profit. As a financial advisor, he is now supposed to suggest to clients to invest in portfolios that will not do as well as the portfolios that Bullzai is invested in. This is an accepted practice done by other businesses in the industry, and it complies with all standards set by the government. However, Lucas knows that this practice is not in his clients' best interest. What type of dilemma is Lucas facing? - Answer Moral This is not a legal issue because the new practice complies with the law, and it is not an ethical issue because it is a commonly accepted practice within the industry. It is a moral issue because it deals with Lucas's own sense of right and wrong. Which type of error would result in a set repercussion or penalty given by the government? - Answer Legal Nora is an investment manager, which means that she is paid to invest other people's money. To meet her goal for the month, she is seeking to invest money from clients in an investment that is risky but potentially has a higher return. What about this situation represents an ethical dilemma? - Answer Nora is considering investing in a risky asset just to meet her monthly goal. Nora is caught between the obligation to meet her goal and the obligation to keep her clients' money safe. As an investment manager, she is obligated to do what is best for the client. What are the effects of attempting to maximize shareholder value for a business in an unethical way? - Answer It often leads to decreased shareholder value for the business. Endothon Company has decided to move its production from the United States to a foreign country. Which situation below would constitute an unethical action by the company? Lowering costs while keeping prices the same for customers Monitoring public perception of the company Telling current employees about the decision early on Saving money by paying inadequate wages to workers overseas - Answer Saving money by paying inadequate wages to workers overseas Why would bondholders set bond contracts that are very strict to deter the company from taking on risky projects? - Answer Bondholders are primarily interested in making sure they will be paid back. If a company takes on a riskier project, there is a higher probability of the project being unsuccessful, which means that the bondholders may put themselves at a higher risk of not receiving their loan back. Which kind of projects are bondholders interested in? - Answer Safe projects with a higher chance of providing sufficient compensation. Bondholders provide money for a company for a certain period of time and want companies to pay them back for their investment. "Which scenario is an example of an agency problem? The management team works overtime without pay to complete financial reports. An employee takes a potential client to dinner and pays for it using the company credit card. The owners of the company offer shares of the company to management. A manager purchases a company car and allocates it as a company expense. - Answer A manager purchases a company car and allocates it as a company expense. How can agency costs be mitigated? - Answer Aligning managers' interests with shareholders' interests WGU D076 Finance Skills for Managers(Quiz Questions)And Answers!! What is the third step in finding a solution to an ethical dilemma? - Answer Consider all stakeholders involved First, you should identify and define the problem. Second, consider alternative courses of action. Third, consider all stakeholders involved. What does the term legal describe? - Answer An action that is in accordance with the laws and rules set by an authority. Jack is a personal financial advisor. He is with a new client, and the client is asking him what he recommends for her portfolio. Jack knows that his firm's investment product performed well last year, but its performance changes from year to year— some years it is better than the market, and some years it is not. Also, the fee to invest in the product is higher than the fee to invest in a market index fund. If Jack sells his company's investment product, the customer's loyalty to the company is doubled. Which actions should Jack take? - Answer Give a personal recommendation of the company's product while explaining its performance relative to the market over the past several years. Why might a manager manipulate accounting procedures? - Answer A manager might manipulate accounting procedures to inflate the earnings of a company, which would optimize bonuses and stock-price-related benefits for management. Which situation is an example of an agency problem? - Answer Managers follow their own interests instead of the owners' interest. A company is trying to finance a project with a mortgage loan from a bank. The company's assessment of the project indicates that the company may experience several years of loss until the project becomes profitable. This means that the company might lose its ability to pay back the loan and the interest on the mortgage. What action might the bank take to protect its interest? - Answer Set a strict covenant that the company cannot easily achieve. By setting a strict covenant, there is a risk that the company may not meet its obligation, which would deter the company from taking on risky projects. What are the main services offered by financial institutions? - Answer Accepting a wide variety of deposits, offering investment products, providing loans, and brokering financial transactions What is the main objective of personal financial goals? - Answer To maximize individual utility Why is understanding the definition of finance important in managing personal finances? - Answer It helps individuals compare the costs and benefits of an action to determine whether to take that action. WGU D076 Finance Skills for Managers(Quiz Questions)And Answers!! In which type of market would a company issue bonds or stocks for the first time? - Answer Primary market Which type of financial institution is a mutual fund? - Answer Investment institution Which financial institution specializes in managing and administering retirement funds? - Answer Pension funds Which type of economic indicator is the consumer price index? - Answer Lagging indicator What does the term ethical refer to? - Answer The accepted standards of conduct that guide a person's behavior A company's officers and board of directors are selling their stocks in the firm at higher prices due to false accounting reports that made the stock seem more valuable than it truly was. Which ethical issue is occurring in this situation? - Answer Agency problem due to conflicting interests What is the term for the percentage of the principal that a lender charges a borrower for the use of assets? - Answer Interest rate How is the interest rate expressed? - Answer As a percentage