WGU C214 Financial Management Exam
with Verified Solutions
The goal of using a financial derivative such as a forward or a future is to ✔️✔️make no
profits through exchange rate movements
What is the primary motive for tariffs ✔️✔️to protect domestic industries
The purpose of currency restriction is what ✔️✔️to limit the ability of a foreign firm to take
capital outlay out of a country
Accrual accounting is superior because ✔️✔️cash accounting can be inaccurate since the
receipt and disbursement of cash is frequently not synchronized with operating variables
NOTE: in accrual accounting, revenues and expenses are recorded when they are earned and
project is complete- synchronized
When two rates are given in a word problem ✔️✔️the coupon rate should be multiplied by FV
A simple interest problem formula is ✔️✔️simple interest = principle * I/Y * number of years
Sensitivity rates analyze ✔️✔️the uncertainty of forecasted assumptions regarding investment
projects
,NOTE: what makes the rate sensitive is the "uncertainty" & "assumption"
I/Y can be described as ✔️✔️the rate of return, the yield, or the interest rate
In the CAPM framework, why do investors hold the market portfolio ✔️✔️any stock with
higher expected returns relative to risk will converge to the market portfolio
If no future value is given in a problem ✔️✔️assume FV is $1000 or you are solving for FV
Accounts that vary directly with sales are called ✔️✔️spontaneous accounts
NOTE: sales are almost always spontaneous; very seldom do we buy a new pair of shoes because
we planned to do so
If future value and present value are given in a problem ✔️✔️use the +/- key for PV
If problem is semi-annual ✔️✔️N doubles, IY and PMT are 1/2
N = x2
I/Y = /2
PMT = /2
NOTE: if a coupon rate is given in the problem, and solving for PMT or IY, do NOT double the
resulting answer b/c coupon rates don't change
, How do we compute future levels of spontaneous accounts ✔️✔️multiply projected levels of
sales by historical percent of sales
NOTE: compare by utilizing previous sales percentages
The formula for a preferred stock word problem is ✔️✔️dividend rate / discount rate
NOTE: leave out the PAR value ($1000) provided in the problem
The formula for a perpetual annuity with "growth" in the problem is ✔️✔️PV = payment *
(interest rate - growth rate)
If problem has BEGINNING ✔️✔️change calculator to BEGIN mode
Hedging strategies ✔️✔️minimize differences and reduce exposure of gains and losses due to
the international business climate
The result of imports and exports are ✔️✔️imports to the US become cheaper to US
consumers while exports become more expensive to foreign consumers
A collection float can be specifically defined as ✔️✔️the time it takes for a firm to be able to
use the payments from customers
with Verified Solutions
The goal of using a financial derivative such as a forward or a future is to ✔️✔️make no
profits through exchange rate movements
What is the primary motive for tariffs ✔️✔️to protect domestic industries
The purpose of currency restriction is what ✔️✔️to limit the ability of a foreign firm to take
capital outlay out of a country
Accrual accounting is superior because ✔️✔️cash accounting can be inaccurate since the
receipt and disbursement of cash is frequently not synchronized with operating variables
NOTE: in accrual accounting, revenues and expenses are recorded when they are earned and
project is complete- synchronized
When two rates are given in a word problem ✔️✔️the coupon rate should be multiplied by FV
A simple interest problem formula is ✔️✔️simple interest = principle * I/Y * number of years
Sensitivity rates analyze ✔️✔️the uncertainty of forecasted assumptions regarding investment
projects
,NOTE: what makes the rate sensitive is the "uncertainty" & "assumption"
I/Y can be described as ✔️✔️the rate of return, the yield, or the interest rate
In the CAPM framework, why do investors hold the market portfolio ✔️✔️any stock with
higher expected returns relative to risk will converge to the market portfolio
If no future value is given in a problem ✔️✔️assume FV is $1000 or you are solving for FV
Accounts that vary directly with sales are called ✔️✔️spontaneous accounts
NOTE: sales are almost always spontaneous; very seldom do we buy a new pair of shoes because
we planned to do so
If future value and present value are given in a problem ✔️✔️use the +/- key for PV
If problem is semi-annual ✔️✔️N doubles, IY and PMT are 1/2
N = x2
I/Y = /2
PMT = /2
NOTE: if a coupon rate is given in the problem, and solving for PMT or IY, do NOT double the
resulting answer b/c coupon rates don't change
, How do we compute future levels of spontaneous accounts ✔️✔️multiply projected levels of
sales by historical percent of sales
NOTE: compare by utilizing previous sales percentages
The formula for a preferred stock word problem is ✔️✔️dividend rate / discount rate
NOTE: leave out the PAR value ($1000) provided in the problem
The formula for a perpetual annuity with "growth" in the problem is ✔️✔️PV = payment *
(interest rate - growth rate)
If problem has BEGINNING ✔️✔️change calculator to BEGIN mode
Hedging strategies ✔️✔️minimize differences and reduce exposure of gains and losses due to
the international business climate
The result of imports and exports are ✔️✔️imports to the US become cheaper to US
consumers while exports become more expensive to foreign consumers
A collection float can be specifically defined as ✔️✔️the time it takes for a firm to be able to
use the payments from customers
