WGU C214 Financial Management End of Section Questions and Answers Graded A+

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WGU C214 Financial Management End of Section Questions and Answers Graded A+ Economics is a subfield of Finance (t/f) 1.1 ✔✔F. Finance is a subfield of Economics. (right answer) Which of the ... following is not an example of firm capital? 1.1 ✔✔Financial markets Which of the following are examples of firm capital? 1.1 ✔✔Cash, Labor, Machinery Capital is defined as a financial asset. (t/f) 1.1 ✔✔T. Capital is defined as a financial asset. Corporate finance is devoted to understanding various types of financial instruments. (t/f) 1.1 ✔✔F. Investments is devoted to understanding various types of financial instruments. (right answer) Which of the following is an example of firm capital? 1.1 ✔✔Cash Corporate finance focuses on the decision making by the management of the firm. (t/f) 1.1 ✔✔T. Corporate finance focuses on the decision making by the management of the firm. What are the three important areas of finance discussed in this section?1.1 ✔✔Corporate Finance, Investments, and Banking/financial institutions Banks make money when interest rates they charge to borrowers are less than interest rates they pay depositors. (t/f) 1.1 ✔✔F. Banks make money when interest rates they charge to borrowers are MORE than interest rates they pay depositors. (right answer) Stocks and bonds are two types of financial instruments. t/f 1.1 ✔✔T. Stocks and bonds are two types of financial instruments. Stock represents ownership in a particular company. t/f 1.2 ✔✔T. Stock represents ownership in a particular company. Companies can raise capital by issuing bonds or stocks. t/f 1.2 ✔✔T. Companies can raise capital by issuing bonds or stocks. A stock is a debt instrument issued by corporations. t/f 1.2 ✔✔F. A stock represents ownership in a company (right answer) A Treasury bond is a debt instrument issued by corporations. t/f 1.2 ✔✔F. A Treasury bond is a debt instrument issued by governments. (right answer) A bond is a debt instrument issued by corporations or governments. t/f 1.2 ✔✔T. A bond is a debt instrument issued by corporations or governments. A stock is a share of ______________ in a particular company. 1.2 ✔✔ownership 1.2 A bond is similar to a loan. t/f 1.2 ✔✔T A bond is similar to a loan. Primary financial markets are markets where issuers place new securities with investors. t/f 1.3 ✔✔T. Primary financial markets are markets where issuers place new securities with investors. What are the two ways a syndicate can place a bond? 1.3 ✔✔Competitive sale or negotiated sale An IPO is a seasoned equity offering. t/f 1.3 ✔✔false. IPO is new equity offering (right answer) An IPO occurs on the primary market. t/f 1.3 ✔✔T An IPO occurs on the primary market. Syndicates are generally made up of investment banks and other institutional investors. t/f 1.3 ✔✔T Syndicates are generally made up of investment banks and other institutional investors. While competitive sales allow underwriters to submit bids to purchase bonds, negotiated sales do not. t/f 1.3 ✔✔F negotiated and competitive sales both submit bids. negotiated sales more involved (right answer) NASDAQ is the world's largest secondary financial market. t/f 1.4 ✔✔F The NYSE is the world's largest secondary financial market. (right) Auction markets have a physical location. t/f 1.4 ✔✔T Auction markets have a physical location. (right) Dealer markets have a physical location. t/f 1.4 ✔✔F Auction markets have a physical location. Dealer markets do not. (right) Nasdaq is an example of an auction market. t/f 1.4 ✔✔F Nasdaq is an example of a dealer market. (right) Stocks that are listed on dealer markets generally have a single dealer for each stock. t/f 1.4 ✔✔F Stocks that are listed on dealer markets generally have multiple dealers for each stock. (right) When dealers have to compete with one another, transaction costs will generally ___________. 1.4 ✔✔decrease1.4 Markets are where prices are determined. t/f 1.4 ✔✔T Markets are where prices are determined. The NYSE specialist has an objective to provide liquidity to the market. t/f 1.5 ✔✔T The NYSE specialist has an objective to provide liquidity to the market. The NYSE specialist will charge a higher price to sellers of the stock and a lower price to the buyer of the stock. t/f 1.5 ✔✔F The NYSE specialist will charge a lower price to sellers of the stock and a higher price to the buyer of the stock. (right) The ask price of stock A is $56.75 while the bid price for stock A is $56.71. What is the bid ask spread? 1.5 ✔✔.04 56.75-56.71 = 0.04 The ask price of stock A is $215.54 while the bid price for stock A is $215.14. What is the bid ask spread? 1.5 ✔✔.40 215.54-215.14 = 0.40 The bid-ask spread is compensation to the specialist for providing liquidity to the market. t/f 1.5 ✔✔T The bid-ask spread is compensation to the specialist for providing liquidity to the market. What are the two types of orders that are used by investors? 1.6 ✔✔Market Orders and Limit Orders 1.6 Market orders are __________ sensitive while limit orders are _____________ sensitive. 1.6 ✔✔time, price 1.6 A market order to buy a stock would execute at the current ask price. t/f 1.6 ✔✔T A market order to buy a stock would execute at the current ask price. 1.6 A market order to sell a stock would execute at the current ask price. t/f 1.6 ✔✔False. The order would execute at the current bid price. A limit order to buy a stock at $101.55 would execute at the current ask price. t/f 1.6 ✔✔False. The order would execute when the ask price is at or below $101.55. A limit order to buy a stock at $101.55 would execute when the ask price is at or below $101.55. t/f 1.6 ✔✔T A limit order to buy a stock at $101.55 would execute when the ask price is at or below $101.55. Which of the following best explains the role of prices? 1.7 ✔✔Prices convey information, Prices affect the distribution of income, Prices affect incentives Efficient markets are those in which prices are volatile. t/f 1.7 ✔✔f Efficient markets are those in which prices reflect all relevant information. right Efficient markets will often have mispriced securities. t/f 1.7 ✔✔F Markets that are efficient will have prices that fully reflect the available information about a specific security. Markets that are inefficient will have securities that are mispriced, or the security prices will not reflect all available information. right Inefficient markets are those in which p [Show More]

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