WGU D076 Finance Skills for Managers OA Prep

Unit 2 What are the main services offered by financial institutions? 1. Deciding which assets to invest in to create wealth in the future 2. Soliciting charitable donations and then managing the distribution of these funds 3. Evaluating sources of funding for a business project, the capital structure of a firm, or actions managers could take to increase the value of the firm 4. Accepting a wide variety of deposits, offering investment products, providing loans, and brokering financial transactions - answer-4. 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. Unit 2 What is the main objective of personal financial goals? 1. To maximize stock investments 2. To maximize owner wealth 3. To maximize charity donations 4. To maximize individual utility - answer-4. To maximize individual utility Correct! You set goals and act to increase your satisfaction or happiness by taking care of necessities and achieving priorities. Unit 2 Which task does the financial manager of a firm perform that involves the issuance of new stocks and bonds? 1. Deciding on accounting standards 2. Making financing decisions 3. Managing working capital 4. Making investing decisions - answer-2. 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. Unit 2 Why is understanding the definition of finance important in managing personal finances? 1. It helps individuals act ethically with regard to finances. 2. It helps individuals understand legal issues related to finance. 3. It helps individuals compare the costs and benefits of an action to determine whether to take that action. 4. It allows individuals to find an investment with the highest return possible. - answer-3. 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. Unit 2 In which type of market would a company issue bonds or stocks for the first time? 1. Dealer market 2. Money market 3. Secondary market 4. Primary market - answer-4. Primary market Correct! This is the purpose of a primary market. Unit 2 Which type of financial institution is a mutual fund? 1. Federal institution 2. Contractual institution 3. Depository institution 4. Investment institution - answer-4. Investment institution Correct! Investment institutions provide individuals and firms access to financial markets. Unit 2 Which financial institution specializes in managing and administering retirement funds? 1. Mutual funds 2. Investment banks 3. Private equity 4. Pension funds - answer-4. Pension funds Correct! Pension funds specialize in retirement funds. Unit 2 Which type of economic indicator is the consumer price index? 1. Lagging indicator 2. Coincident indicator 3. Forecasting indicator 4. Leading indicator - answer-1. Lagging indicator Correct! Cpi usually changes after the economy as a whole changes. Unit 2 What does the term ethical refer to? 1. An idea or thing used as a measure, norm, or model in comparative evaluations 2. The accepted standards of conduct that guide a person's behavior 3. Following the laws and rules set by an authority 4. One's beliefs about right and wrong, good and bad, or just and unjust - answer-2. 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. Unit 2 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? 1. Conflict between work and personal affairs 2. Agency problem due to conflicting interests 3. Pursuing individual interest over client interests 4. Maximizing shareholder value - answer-2. 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 Task 1: suppose you invested some money today into an account that will pay 10% per year with the goal to have $100,000 (pull out) in 30 years. How much do you have to deposit today? Rate: Nper: Pmt: Fv: Type: Pv: - answer-rate: 10% Nper: 30 Pmt: 0 Fv: 100,000 Type: 0 Pv: =pv(rate,nper,pmt,fv,type) = (-$5,730.86) Unit 3 - this is wrong Task 2: what is the future value of the following annuity due? Receiving $800 a year for 2 years compounded at 3.5% annually. Rate: Nper: Pmt: Pv: Type: Fv: - answer-rate: 3.5 Nper: 2 Pmt: 800 Pv: 0 Type: 0 Fv: =fv(rate,nper,pmt,fv,type) = (-$1,628) Unit 3 Task 3: what is the present value of the following stream of cash flows at a discount rate of 6%? year 1 year 2 year 3 year 4 year 5 year 6 Cf $3,150 $4,320 $3,600 $2,340 $2,500 $2,850 Discount rate: 6.0% Pv: - answer-pv: =npv(rate,year1,year2,year3,year4,year5,year6) =$15,569.89 Unit 3 Task 4: what is the rate of return of an investment with the following stream of cash flows? year 0 year 1 year 2 year 3 Cfs -$2,250 $2,700 $2,100 $1,500 Rate of return: - answer-year 0 year 1 year 2 year 3 Cfs -$2,250 $2,700 $2,100 $1,500 Rate of return: =irr(year0,year1,year2,year3) = 88.35% Unit 3 What is another name for the cost of capital? 1. Discount rate 2. Real rate 3. Inflation rate 4. Compound interest - answer-1. Discount rate Correct. Cost of capital, discount rate, required rate, and interest rate are the same thing with different names based on different perspectives.