D076 WGU TEST FINANCE SKILLS FOR MANAGERS
UNIT 2
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
(Correct! Financial institutions such as banks, insurance companies, and mutual fund
companies provide these services.)
What is the main objective of personal financial goals? - Answer -To maximize
individual utility
(Correct! You set goals and act to increase your satisfaction or happiness by taking care
of necessities and achieving priorities.)
Which task does the financial manager of a firm perform that involves the issuance of
new stocks and bonds? - Answer -Making financing decisions
(Correct! Once investment decisions are made, a financial manager considers different
possibilities of financing sources for the investments. This may include issuing new
stocks and bonds.)
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.
(Correct! Any financial decision should make sense in terms of its costs and benefits.)
In which type of market would a company issue bonds or stocks for the first time? -
Answer -Primary market
(Correct! This is the purpose of a primary market.)
Which type of financial institution is a mutual fund? - Answer -Investment institution
(Correct! Investment institutions provide individuals and firms access to financial
markets.)
Which financial institution specializes in managing and administering retirement funds? -
Answer -Pension funds
(Correct! Pension funds specialize in retirement funds.)
, Which type of economic indicator is the consumer price index? - Answer -Lagging
indicator
(Correct! CPI usually changes after the economy as a whole changes.)
What does the term ethical refer to? - Answer -The accepted standards of conduct that
guide a person's behavior
(Correct! Ethical refers to 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
(Correct! Accounting manipulation by management in pursuit of higher stock-related
compensation is an example of an agency problem.)
UNIT 3
What is another name for the cost of capital? - Answer -Discount rate
(Correct. Cost of capital, discount rate, required rate, and interest rate are the same
thing with different names based on different perspectives.)
What is the name for the minimum rate of return that an investor or lender will accept for
investments? - Answer -Required rate of return
(Correct. This is the rate that investors accept as compensation for risk, opportunity
cost, and inflation.)
The nominal interest rate of an investment is 8%, and the inflation rate is 3%. What is
the real interest rate? - Answer -5%
(Correct. Real Rate = Nominal Rate - Inflation, so 8% - 3% = 5%.)
Which action reduces the future value of cash flows? - Answer -Receive all cash flows
later than expected.
(Correct. The later the cash flows are received, the lower the future value is.)
How is risk defined in finance? - Answer -The possibility that the realized or actual
return will differ from what we expect
UNIT 2
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
(Correct! Financial institutions such as banks, insurance companies, and mutual fund
companies provide these services.)
What is the main objective of personal financial goals? - Answer -To maximize
individual utility
(Correct! You set goals and act to increase your satisfaction or happiness by taking care
of necessities and achieving priorities.)
Which task does the financial manager of a firm perform that involves the issuance of
new stocks and bonds? - Answer -Making financing decisions
(Correct! Once investment decisions are made, a financial manager considers different
possibilities of financing sources for the investments. This may include issuing new
stocks and bonds.)
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.
(Correct! Any financial decision should make sense in terms of its costs and benefits.)
In which type of market would a company issue bonds or stocks for the first time? -
Answer -Primary market
(Correct! This is the purpose of a primary market.)
Which type of financial institution is a mutual fund? - Answer -Investment institution
(Correct! Investment institutions provide individuals and firms access to financial
markets.)
Which financial institution specializes in managing and administering retirement funds? -
Answer -Pension funds
(Correct! Pension funds specialize in retirement funds.)
, Which type of economic indicator is the consumer price index? - Answer -Lagging
indicator
(Correct! CPI usually changes after the economy as a whole changes.)
What does the term ethical refer to? - Answer -The accepted standards of conduct that
guide a person's behavior
(Correct! Ethical refers to 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
(Correct! Accounting manipulation by management in pursuit of higher stock-related
compensation is an example of an agency problem.)
UNIT 3
What is another name for the cost of capital? - Answer -Discount rate
(Correct. Cost of capital, discount rate, required rate, and interest rate are the same
thing with different names based on different perspectives.)
What is the name for the minimum rate of return that an investor or lender will accept for
investments? - Answer -Required rate of return
(Correct. This is the rate that investors accept as compensation for risk, opportunity
cost, and inflation.)
The nominal interest rate of an investment is 8%, and the inflation rate is 3%. What is
the real interest rate? - Answer -5%
(Correct. Real Rate = Nominal Rate - Inflation, so 8% - 3% = 5%.)
Which action reduces the future value of cash flows? - Answer -Receive all cash flows
later than expected.
(Correct. The later the cash flows are received, the lower the future value is.)
How is risk defined in finance? - Answer -The possibility that the realized or actual
return will differ from what we expect
