WGU C214 Questions and Answers
100% Pass
Corporate Finance ✔✔focuses on financial decision making by a firms management
Investments ✔✔various types of financial instruments (stocks, bonds, etc)
Banking or Financial Institutions ✔✔make money by paying depositors a smaller interest rate
than the interest rate charged to borrowers
Treasury Securities ✔✔generally bonds that are issued by the US government
Corporate Bonds ✔✔firms borrowing from the public
Stocks ✔✔a share of ownership in a company
Primary financial markets ✔✔markets where securities are first issued
,Syndicate ✔✔a group that is temporarily formed to handle a bond or stock issue: generally large
investment bank or institutional investors
Underwriter ✔✔responsible for determining the value of the security; may purchase all the
securities & then resale to investors
Competitive sale ✔✔underwriters submit bids offering highest price/lowest interest rate;
underwriter resales a slightly higher price
Negotiated sale ✔✔underwriters submit bids, go thru interview to be selected
Secondary financial markets ✔✔where securities are traded after the initial offering (stock
market)
Auction market ✔✔has a physical location & prices are determined by the highest price an
investor is willing to pay (New York Stock Exchange)
Dealer market ✔✔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 ✔✔they reduce the cost of borrowing from the public or selling
ownership to the public
Role of Specialist (NYSE) or Dealers ✔✔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 ✔✔the ease of trading in the market (high frquency traders)
Market orders ✔✔time sensitive; sales at current bid price/buys at current asking price when
order is placed-immediately
Limited orders ✔✔price sensitive; sell occurs when price of stock matches order price
Role of price ✔✔convet information to consumers; affect incentives &affect the distribution of
income
Dollar Returns ✔✔Pt - Pt-1 + CFt (Pt= sold price, Pt-1=bought price, CFt=cash flow-coupons
for bonds/dividians for stocks)
, Percentage Returns ✔✔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 ✔✔to maximize shareholder value or maximize profit
Agency costs ✔✔costs that are incurred when management doesn't act in the best interests of
shareholders
Profit maximizarion ✔✔the potential effect of focusing soley on profits
Accounting ✔✔is backward-looking and risk free
Finance ✔✔is forward-looking and involes massive uncertainty
Income Statement ✔✔show results of operation over time; revenues - expenses = net income
100% Pass
Corporate Finance ✔✔focuses on financial decision making by a firms management
Investments ✔✔various types of financial instruments (stocks, bonds, etc)
Banking or Financial Institutions ✔✔make money by paying depositors a smaller interest rate
than the interest rate charged to borrowers
Treasury Securities ✔✔generally bonds that are issued by the US government
Corporate Bonds ✔✔firms borrowing from the public
Stocks ✔✔a share of ownership in a company
Primary financial markets ✔✔markets where securities are first issued
,Syndicate ✔✔a group that is temporarily formed to handle a bond or stock issue: generally large
investment bank or institutional investors
Underwriter ✔✔responsible for determining the value of the security; may purchase all the
securities & then resale to investors
Competitive sale ✔✔underwriters submit bids offering highest price/lowest interest rate;
underwriter resales a slightly higher price
Negotiated sale ✔✔underwriters submit bids, go thru interview to be selected
Secondary financial markets ✔✔where securities are traded after the initial offering (stock
market)
Auction market ✔✔has a physical location & prices are determined by the highest price an
investor is willing to pay (New York Stock Exchange)
Dealer market ✔✔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 ✔✔they reduce the cost of borrowing from the public or selling
ownership to the public
Role of Specialist (NYSE) or Dealers ✔✔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 ✔✔the ease of trading in the market (high frquency traders)
Market orders ✔✔time sensitive; sales at current bid price/buys at current asking price when
order is placed-immediately
Limited orders ✔✔price sensitive; sell occurs when price of stock matches order price
Role of price ✔✔convet information to consumers; affect incentives &affect the distribution of
income
Dollar Returns ✔✔Pt - Pt-1 + CFt (Pt= sold price, Pt-1=bought price, CFt=cash flow-coupons
for bonds/dividians for stocks)
, Percentage Returns ✔✔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 ✔✔to maximize shareholder value or maximize profit
Agency costs ✔✔costs that are incurred when management doesn't act in the best interests of
shareholders
Profit maximizarion ✔✔the potential effect of focusing soley on profits
Accounting ✔✔is backward-looking and risk free
Finance ✔✔is forward-looking and involes massive uncertainty
Income Statement ✔✔show results of operation over time; revenues - expenses = net income
