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WGU Financial Management C214
Questions and Correct Detailed
Answers (Verified Answers)
Q: Financial Securities (3 types)
Ans: 1. Gov Securities(treasury bonds)- gov invest in natl defense to freeways.
Loans provide by the public to gov. When tax revs fall short to cover
expenditures, gov issues bonds from 60 days-30yrs.
2. Corporate Bonds- Google might be looking to invest another $50 billion in low-
orbiting satellites; however, because of its size, the company cannot walk into a
local bank hoping for a $50-billion loan. Instead, Google will likely issue bonds
with a face value of $1,000 that make one or two annual coupon payments a year
and might be paid back over a 20-year period.
Corporate finance is NOT devoted to understanding various types of financial
instruments; investments are. *Corporate finance focuses on the decision making
by the management of the firm.
3. Stocks- share of ownership in a co. If Google did not want to borrow money
from bondholders to finance the $50-billion low-orbiting satellite project, Google
could sell shares of ownership in the company.
Master01 | 2025/2026 | Latest update
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Q: Syndicate
Ans: is a group that is temporarily formed to handle a bond or stock issue.
Syndicates are generally made up of large investment banks or other types of
institutional investors. These large investment banks that make up a syndicate
might also be the underwriters of the security issue. An underwriter has the
responsibility of determining the value of the security and then, in some cases,
the underwriter will purchase all of the securities from the issuer and then sell
them to other investors.
Two ways a firm issuing a bond can place the bonds with a syndicate:
1. Competitive Sale- Those wishing to underwrite the bond issue will submit bids
(on bond's prices and interest rate) to the issuing firm. Firm will then select the
underwriter that offered the highest price and lowest interest rate. Underwriter
will sell bonds to various investors at (hopefully) a slightly higher price than
purchase price.
2. Negotiated Sale- like the competitive sale, a negotiated sale is the process of
underwriters submitting proposals including bids. However, this latter type of
sale involves a more thorough interview process with the underwriters. Further,
the issuing firm will carefully select the management team that will place these
bonds.
Q: Primary Markets (Stocks & Bonds)
Master01 | 2025/2026 | Latest update
, 3
Ans: The primary market for stock issuance works in a similar way to the bond
primary market. However, some terminology is different. A firm that is going
public (or selling shares of ownership for the first time) is going to perform an
initial public offering (IPO). These IPOs are sometimes called new equity
offerings. However, much of the underwriting occurs in a similar manner, which
we have discussed above.
Q: Secondary Markets (2 types)
Ans: 1. Auction Market- an auction financial market has a physical location and
prices are determined by the highest price an investor is willing to pay. The New
York Stock Exchange (NYSE), the world's largest secondary financial market. NYSE
has a single dealer that provides liquidity.
*Some high frequency traders provide liquidity to the rest of the market.
*If providing liquidity becomes more risky, then dealers will increase the spread.
*If the price of a particular stock begins to heavily fluctuate, then the specialist
will INCREASE the spread.
2. Dealer market- does not require a physical location. Securities are bought and
sold through a network of dealers that trade for themselves. a dealer might hold
inventory for particular stock and willing to sell to those that demand the stock
and buy from those that will supply the stock. NASDAQ, (second-largest secondary
market worldly), is example of a dealer market. Most stocks that are listed on
Master01 | 2025/2026 | Latest update
, 4
NASDAQ have multiple dealers for each. The idea behind having multiple dealers
providing liquidity to investors is that the dealers must compete with one
another, thus lowering the cost of transacting.
Q: Spread
Ans: The difference between the bid price and the ask price.
If the price of a particular stock begins to heavily fluctuate, then the specialist
will INCREASE the spread.
Q: Stock Orders (2 types)
Ans: Market orders- are time sensitive and would execute at the current ask
price.
Limit orders-
-Buy Limit Order can only be executed at the limit price or lower
-Sell Limit Order can only be executed at the limit price or higher.
Q: Market Prices
Master01 | 2025/2026 | Latest update
WGU Financial Management C214
Questions and Correct Detailed
Answers (Verified Answers)
Q: Financial Securities (3 types)
Ans: 1. Gov Securities(treasury bonds)- gov invest in natl defense to freeways.
Loans provide by the public to gov. When tax revs fall short to cover
expenditures, gov issues bonds from 60 days-30yrs.
2. Corporate Bonds- Google might be looking to invest another $50 billion in low-
orbiting satellites; however, because of its size, the company cannot walk into a
local bank hoping for a $50-billion loan. Instead, Google will likely issue bonds
with a face value of $1,000 that make one or two annual coupon payments a year
and might be paid back over a 20-year period.
Corporate finance is NOT devoted to understanding various types of financial
instruments; investments are. *Corporate finance focuses on the decision making
by the management of the firm.
3. Stocks- share of ownership in a co. If Google did not want to borrow money
from bondholders to finance the $50-billion low-orbiting satellite project, Google
could sell shares of ownership in the company.
Master01 | 2025/2026 | Latest update
, 2
Q: Syndicate
Ans: is a group that is temporarily formed to handle a bond or stock issue.
Syndicates are generally made up of large investment banks or other types of
institutional investors. These large investment banks that make up a syndicate
might also be the underwriters of the security issue. An underwriter has the
responsibility of determining the value of the security and then, in some cases,
the underwriter will purchase all of the securities from the issuer and then sell
them to other investors.
Two ways a firm issuing a bond can place the bonds with a syndicate:
1. Competitive Sale- Those wishing to underwrite the bond issue will submit bids
(on bond's prices and interest rate) to the issuing firm. Firm will then select the
underwriter that offered the highest price and lowest interest rate. Underwriter
will sell bonds to various investors at (hopefully) a slightly higher price than
purchase price.
2. Negotiated Sale- like the competitive sale, a negotiated sale is the process of
underwriters submitting proposals including bids. However, this latter type of
sale involves a more thorough interview process with the underwriters. Further,
the issuing firm will carefully select the management team that will place these
bonds.
Q: Primary Markets (Stocks & Bonds)
Master01 | 2025/2026 | Latest update
, 3
Ans: The primary market for stock issuance works in a similar way to the bond
primary market. However, some terminology is different. A firm that is going
public (or selling shares of ownership for the first time) is going to perform an
initial public offering (IPO). These IPOs are sometimes called new equity
offerings. However, much of the underwriting occurs in a similar manner, which
we have discussed above.
Q: Secondary Markets (2 types)
Ans: 1. Auction Market- an auction financial market has a physical location and
prices are determined by the highest price an investor is willing to pay. The New
York Stock Exchange (NYSE), the world's largest secondary financial market. NYSE
has a single dealer that provides liquidity.
*Some high frequency traders provide liquidity to the rest of the market.
*If providing liquidity becomes more risky, then dealers will increase the spread.
*If the price of a particular stock begins to heavily fluctuate, then the specialist
will INCREASE the spread.
2. Dealer market- does not require a physical location. Securities are bought and
sold through a network of dealers that trade for themselves. a dealer might hold
inventory for particular stock and willing to sell to those that demand the stock
and buy from those that will supply the stock. NASDAQ, (second-largest secondary
market worldly), is example of a dealer market. Most stocks that are listed on
Master01 | 2025/2026 | Latest update
, 4
NASDAQ have multiple dealers for each. The idea behind having multiple dealers
providing liquidity to investors is that the dealers must compete with one
another, thus lowering the cost of transacting.
Q: Spread
Ans: The difference between the bid price and the ask price.
If the price of a particular stock begins to heavily fluctuate, then the specialist
will INCREASE the spread.
Q: Stock Orders (2 types)
Ans: Market orders- are time sensitive and would execute at the current ask
price.
Limit orders-
-Buy Limit Order can only be executed at the limit price or lower
-Sell Limit Order can only be executed at the limit price or higher.
Q: Market Prices
Master01 | 2025/2026 | Latest update
