D775 Business Finance - PA
Assessment Test 1 Carefully
Structured Questions With Correct
Solutions Graded A+ 2026
Which principle guides business finance to optimize resource use? ANSWER >> Risk-
return trade-off
Which activity describes capital raising in business finance? ANSWER >> Securing
funding for business operations and projects
1
, Which finance activity involves the creation, circulation, and management of money?
ANSWER >> Setting monetary policy
What is common stock? ANSWER >> A share of ownership in a firm with voting rights
What is a characteristic of preferred stock? ANSWER >> Fixed dividends
What is the purpose of bonds from the perspective of issuers? ANSWER >> To raise
capital without diluting ownership
Which type of bonds are considered junk bonds? ANSWER >> Speculative bonds
Which type of investment vehicle is uniquely used for retirement savings? ANSWER >>
401k plans
What is true about options in financial derivatives? ANSWER >> They give the buyer
the right, but not the obligation, to buy or sell an asset.
How do funds benefit from economies of scale? ANSWER >> By making large-scale
investments that reduce transaction costs
What is an initial public offering (IPO)? ANSWER >> The first sale of a company's stock
to the public
What is an example of a secondary market activity? ANSWER >> The trading of stocks
on the New York Stock Exchange
What are the two main types of financial markets based on their functions? ANSWER
>> Primary markets and secondary markets
What is a role of financial regulators? ANSWER >> Ensuring fair and transparent
markets
2
Assessment Test 1 Carefully
Structured Questions With Correct
Solutions Graded A+ 2026
Which principle guides business finance to optimize resource use? ANSWER >> Risk-
return trade-off
Which activity describes capital raising in business finance? ANSWER >> Securing
funding for business operations and projects
1
, Which finance activity involves the creation, circulation, and management of money?
ANSWER >> Setting monetary policy
What is common stock? ANSWER >> A share of ownership in a firm with voting rights
What is a characteristic of preferred stock? ANSWER >> Fixed dividends
What is the purpose of bonds from the perspective of issuers? ANSWER >> To raise
capital without diluting ownership
Which type of bonds are considered junk bonds? ANSWER >> Speculative bonds
Which type of investment vehicle is uniquely used for retirement savings? ANSWER >>
401k plans
What is true about options in financial derivatives? ANSWER >> They give the buyer
the right, but not the obligation, to buy or sell an asset.
How do funds benefit from economies of scale? ANSWER >> By making large-scale
investments that reduce transaction costs
What is an initial public offering (IPO)? ANSWER >> The first sale of a company's stock
to the public
What is an example of a secondary market activity? ANSWER >> The trading of stocks
on the New York Stock Exchange
What are the two main types of financial markets based on their functions? ANSWER
>> Primary markets and secondary markets
What is a role of financial regulators? ANSWER >> Ensuring fair and transparent
markets
2
