WGU FINANCE SKILLS FOR MANAGERS – D076 EXAM VERIFIED ACCURATE SOLUTIONS

1.                Describe what it means for a company or security to have a beta greater than 1.  It indicates that the company or security is more volatile than the overall market.  It shows that the company or security has a fixed return rate.  It suggests the company or security has stable returns.  It means the company or security is less risky than the market.   2.                  Why is the risk-free rate considered a benchmark for evaluating investment performance?    The risk-free rate reflects the average market return.  The risk-free rate is the highest possible return an investor can achieve.  The risk-free rate serves as a baseline for comparing the returns of riskier investments.  The risk-free rate is only applicable to government bonds.   3.                   What is the primary purpose of diversification in finance?    To maximize returns from a single investment  To concentrate investments in one sector  To eliminate all financial risks          To spread risk across different assets 4.                   The term used to refer to cash made/lost on an investment over time:    Return  Price  Equity  Index 5.                   A liquidity ratio measures the:    Percentage of total financing provided by creditors  Ability of a company to survive over a long period of time.  Profit or operating success of a company over a period of time.  Short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash. 6.                  Risk reduction is defined as which of the following?    Actions taken to lessen the probability of a particular risk.  A decision not to become involved in or action to withdraw from a risk situation  A process to assign values to the probability and consequence of a risk  A process of selecti