WGU C214 EXAM SCRIPT 2026 QUESTIONS
AND ANSWERS FULLY VERIFIED
• Investments Answer; various types of financial instruments (stocks,
bonds, etc)
• Banking or Financial Institutions Answer; make money by paying
depositors a smaller interest rate than the interest rate charged to
borrowers
• Treasury Securities Answer; generally bonds that are issued by the US
government
• Corporate Bonds Answer; firms borrowing from the public
• Stocks Answer; a share of ownership in a company
• Primary financial markets Answer; markets where securities are first
issued
• Syndicate Answer; a group that is temporarily formed to handle a bond
or stock issue: generally large investment bank or institutional investors
,• Underwriter Answer; responsible for determining the value of the
security; may purchase all the securities & then resale to investors
• Competitive sale Answer; underwriters submit bids offering highest
price/lowest interest rate; underwriter resales a slightly higher price
• Negotiated sale Answer; underwriters submit bids, go thru interview to
be selected
• Secondary financial markets Answer; where securities are traded after
the initial offering (stock market)
• Auction market Answer; has a physical location & prices are
determined by the highest price an investor is willing to pay (New York
Stock Exchange)
• Dealer market Answer; no physical location- securities are bought &
sold thru a network of dealers that trade for themselves; multi dealers
per stock (NASDAQ)
• Role of financial markets Answer; they reduce the cost of borrowing
from the public or selling ownership to the public
,• Role of Specialist (NYSE) or Dealers Answer; provide liquidity for a
fair & orderly market; may increase the spread to do so (charge a lower
price to seller and a higher price to buyer)
• Financial market liquidity Answer; the ease of trading in the market
(high frquency traders)
• Market orders Answer; time sensitive; sales at current bid price/buys at
current asking price when order is placed-immediately
• Limited orders Answer; price sensitive; sell occurs when price of stock
matches order price
• Role of price Answer; convet information to consumers; affect
incentives &affect the distribution of income
• Dollar Returns Answer; Pt - Pt-1 + CFt (Pt= sold price, Pt-1=bought
price, CFt=cash flow-coupons for bonds/dividians for stocks)
• Percentage Returns Answer; Pt - Pt-1/Pt-1 + CFt/Pt-1 x 100 (1.2)
(figure for dollar return and divide into bought price)
• Goal of company/firm Answer; to maximize shareholder value or
maximize profit
, • Agency costs Answer; costs that are incurred when management
doesn't act in the best interests of shareholders
• Profit maximizarion Answer; the potential effect of focusing soley on
profits
• Accounting Answer; is backward-looking and risk free
• Finance Answer; is forward-looking and involes massive uncertainty
• Income Statement Answer; show results of operation over time;
revenues - expenses = net income
• Balance Sheet Answer; a "snap shot" of a firm's assests & financing at
a paticular point in time; Assets= Liabilities + Owner's Equity
• Statement of Cash Flows Answer; tracks all cash in and out of the firm
• Cash Accounting Answer; cash in =revenue; cash out=expense
• Accrual Accounting Answer; revenues are recognized when the
earnings process is complete; expenses are "matched" to recongized
revenues
AND ANSWERS FULLY VERIFIED
• Investments Answer; various types of financial instruments (stocks,
bonds, etc)
• Banking or Financial Institutions Answer; make money by paying
depositors a smaller interest rate than the interest rate charged to
borrowers
• Treasury Securities Answer; generally bonds that are issued by the US
government
• Corporate Bonds Answer; firms borrowing from the public
• Stocks Answer; a share of ownership in a company
• Primary financial markets Answer; markets where securities are first
issued
• Syndicate Answer; a group that is temporarily formed to handle a bond
or stock issue: generally large investment bank or institutional investors
,• Underwriter Answer; responsible for determining the value of the
security; may purchase all the securities & then resale to investors
• Competitive sale Answer; underwriters submit bids offering highest
price/lowest interest rate; underwriter resales a slightly higher price
• Negotiated sale Answer; underwriters submit bids, go thru interview to
be selected
• Secondary financial markets Answer; where securities are traded after
the initial offering (stock market)
• Auction market Answer; has a physical location & prices are
determined by the highest price an investor is willing to pay (New York
Stock Exchange)
• Dealer market Answer; no physical location- securities are bought &
sold thru a network of dealers that trade for themselves; multi dealers
per stock (NASDAQ)
• Role of financial markets Answer; they reduce the cost of borrowing
from the public or selling ownership to the public
,• Role of Specialist (NYSE) or Dealers Answer; provide liquidity for a
fair & orderly market; may increase the spread to do so (charge a lower
price to seller and a higher price to buyer)
• Financial market liquidity Answer; the ease of trading in the market
(high frquency traders)
• Market orders Answer; time sensitive; sales at current bid price/buys at
current asking price when order is placed-immediately
• Limited orders Answer; price sensitive; sell occurs when price of stock
matches order price
• Role of price Answer; convet information to consumers; affect
incentives &affect the distribution of income
• Dollar Returns Answer; Pt - Pt-1 + CFt (Pt= sold price, Pt-1=bought
price, CFt=cash flow-coupons for bonds/dividians for stocks)
• Percentage Returns Answer; Pt - Pt-1/Pt-1 + CFt/Pt-1 x 100 (1.2)
(figure for dollar return and divide into bought price)
• Goal of company/firm Answer; to maximize shareholder value or
maximize profit
, • Agency costs Answer; costs that are incurred when management
doesn't act in the best interests of shareholders
• Profit maximizarion Answer; the potential effect of focusing soley on
profits
• Accounting Answer; is backward-looking and risk free
• Finance Answer; is forward-looking and involes massive uncertainty
• Income Statement Answer; show results of operation over time;
revenues - expenses = net income
• Balance Sheet Answer; a "snap shot" of a firm's assests & financing at
a paticular point in time; Assets= Liabilities + Owner's Equity
• Statement of Cash Flows Answer; tracks all cash in and out of the firm
• Cash Accounting Answer; cash in =revenue; cash out=expense
• Accrual Accounting Answer; revenues are recognized when the
earnings process is complete; expenses are "matched" to recongized
revenues
