WGU Principles of Finance (C708)
EXAM Test Exam Questions and
Correct Answers (Verified Answers)
Plus Rationales 2026 Q&A At the
Western Governors University.
1. What is the primary goal of financial management?
A. Minimize taxes
B. Maximize shareholder wealth
C. Avoid risk entirely
D. Increase sales
Correct Answer: B
Rationale: Financial management aims to increase the value of the
firm for its owners.
2. What is the time value of money?
A. Money today is worth the same as money in the future
B. Money today is worth more than the same amount in the future
C. Money loses value over time only
D. Interest rates have no effect
Correct Answer: B
Rationale: Due to interest and investment opportunities, money now
has greater value than the same amount later.
3. What is present value (PV)?
,A. Future cash amount
B. Current worth of future cash flows
C. Total profit
D. Debt amount
Correct Answer: B
Rationale: PV discounts future cash flows to determine their value
today.
4. What is future value (FV)?
A. Current investment amount
B. Amount an investment grows to over time
C. Annual revenue
D. Depreciation value
Correct Answer: B
Rationale: FV calculates the value of current funds at a future date,
considering interest or growth.
5. What is the formula for simple interest?
A. I = P × r × t
B. I = P / r × t
C. I = P + r × t
D. I = P × r / t
Correct Answer: A
Rationale: Simple interest is calculated by multiplying principal,
rate, and time.
6. What is compound interest?
A. Interest on principal only
B. Interest on principal plus accumulated interest
C. Tax-exempt interest
D. Loan fees only
, Correct Answer: B
Rationale: Compound interest grows faster because it earns interest
on prior interest.
7. What is a bond?
A. Ownership in a company
B. Debt security issued to raise capital
C. Bank account
D. Investment in real estate
Correct Answer: B
Rationale: Bonds are loans investors give to companies or
governments in exchange for interest.
8. What is a stock?
A. Debt instrument
B. Ownership share in a corporation
C. Short-term loan
D. Bank deposit
Correct Answer: B
Rationale: Stock represents a partial ownership interest in a
company.
9. What is the difference between common and preferred stock?
A. Common has voting rights; preferred has fixed dividends
B. Preferred votes; common has fixed dividends
C. Both are identical
D. Common is debt; preferred is equity
Correct Answer: A
Rationale: Common shareholders vote and have variable dividends;
preferred shareholders receive fixed payments but usually no vote.
10. What is the risk-return tradeoff?
EXAM Test Exam Questions and
Correct Answers (Verified Answers)
Plus Rationales 2026 Q&A At the
Western Governors University.
1. What is the primary goal of financial management?
A. Minimize taxes
B. Maximize shareholder wealth
C. Avoid risk entirely
D. Increase sales
Correct Answer: B
Rationale: Financial management aims to increase the value of the
firm for its owners.
2. What is the time value of money?
A. Money today is worth the same as money in the future
B. Money today is worth more than the same amount in the future
C. Money loses value over time only
D. Interest rates have no effect
Correct Answer: B
Rationale: Due to interest and investment opportunities, money now
has greater value than the same amount later.
3. What is present value (PV)?
,A. Future cash amount
B. Current worth of future cash flows
C. Total profit
D. Debt amount
Correct Answer: B
Rationale: PV discounts future cash flows to determine their value
today.
4. What is future value (FV)?
A. Current investment amount
B. Amount an investment grows to over time
C. Annual revenue
D. Depreciation value
Correct Answer: B
Rationale: FV calculates the value of current funds at a future date,
considering interest or growth.
5. What is the formula for simple interest?
A. I = P × r × t
B. I = P / r × t
C. I = P + r × t
D. I = P × r / t
Correct Answer: A
Rationale: Simple interest is calculated by multiplying principal,
rate, and time.
6. What is compound interest?
A. Interest on principal only
B. Interest on principal plus accumulated interest
C. Tax-exempt interest
D. Loan fees only
, Correct Answer: B
Rationale: Compound interest grows faster because it earns interest
on prior interest.
7. What is a bond?
A. Ownership in a company
B. Debt security issued to raise capital
C. Bank account
D. Investment in real estate
Correct Answer: B
Rationale: Bonds are loans investors give to companies or
governments in exchange for interest.
8. What is a stock?
A. Debt instrument
B. Ownership share in a corporation
C. Short-term loan
D. Bank deposit
Correct Answer: B
Rationale: Stock represents a partial ownership interest in a
company.
9. What is the difference between common and preferred stock?
A. Common has voting rights; preferred has fixed dividends
B. Preferred votes; common has fixed dividends
C. Both are identical
D. Common is debt; preferred is equity
Correct Answer: A
Rationale: Common shareholders vote and have variable dividends;
preferred shareholders receive fixed payments but usually no vote.
10. What is the risk-return tradeoff?
