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FIN /
/320F /
/Exam //
/Working /
/Words /
/(Duvic) //Questions //With //Correct //Answers
UNIT // 1 //- //verified //answer(s)- ✔✔
Incentives //- //verified //answer(s)-
✔✔ Something //that //motivates //a //person //to //take //or //avoid //taking //an //action.
Resources //- //verified //answer(s)-
✔✔ Physical //or //intangible //assets //that //can //be //used //to //accomplish //a //goal.
Confirmation //Bias //- //verified //answer(s)-
✔✔ The /
/tendency /
/to /
/process /
/information /
/by /
/looking /
/for, /
/or /
/interpreting /
/information //that //is //consistent //with //one's //existing //beliefs. //Encyclopaedia //Brittanica
Economic //activity //- //verified //answer(s)-
✔✔ The //production, //distribution //and //consumption //of //economic //assets.
Economic //assets //- //verified //answer(s)-
✔✔ Assets /
/functioning /
/as /
/stores /
/of /
/value /
/and /
/over /
/which /
/ownership /
/rights /
/are /
/enforced /
/by /
/institutional /
/units, /
/individually /
/or /
/collectively, /
/and /
/from /
/which /
/economic /
/benefits /
/may /
/be /
/derived /
/by /
/in /
/authority, /
/especially //political //leaders, //government //administrators, //judicial //officials //and //police
UNIT // 3 //- //verified //answer(s)- ✔✔
Business //- //verified //answer(s)-
✔✔ is /
/an /
/organization /
/that /
/raises /
/capital /
/from /
/investors, /
/uses /
/this /
/capital /
/to /
/obtain /
/productive //assets, //and //uses //these //productive //assets //to //produce //economic //assets--
goods //and //services--for //customers.
Profit //- //verified //answer(s)-
✔✔ The /
/surplus /
/that /
/occurs /
/when /
/the /
/revenues /
/received /
/from //a //business' //productive //efforts //exceeds //the //cost //of //producing //economic //assets.
Efficiency //- //verified //answer(s)-
✔✔ Getting /
/the /
/maximum /
/output /
/from /
/scarce /
/resources. /
/Different /
/levels /
/of //efficiency //result //from //how //businesses' //organize //productive //effort //and //raise //capital.
Proprietorship //- //verified //answer(s)-
✔✔ A /
/business /
/where //
a /
/person /
/combines /
/the //functions //of //owner, //manager //and //worker. //Proprietorships //are //efficient //in //small-scale
//operations.
General //Partnership //- //verified //answer(s)-
✔✔ A //business //where //several //people //share //ownership //and //management.
Corporation //- //verified //answer(s)-
✔✔ A /
/business /
/that /
/is /
/chartered /
/by /
/government /
/to /
/conduct /
/the /
/company //and //rights //to //all //residual //profit. //Also //called //equity //holders //and //stockholders.
Stakeholders //- //verified //answer(s)-
✔✔ Anyone /
/other //than //shareholders //or //bondholders //who //have //a //stake, //or //interest //in //the //firm.
Corporate //governance //- //verified //answer(s)-
✔✔ The /
/structure //and //procedures //that //allow //the //shareholders //to //control //the //corporation.
Agency //relationship //- //verified //answer(s)-
✔✔ The /
/corporate /
/organizational /
/form /
/legally /
/separates /
/ownership /
/and /
/management. /
/The /
/shareholders /
/of /
/the //company //are //principals //and //hire //managers //as //their //agents //to //run //the //corporation.
Agency //problem //- //verified //answer(s)-
✔✔ Managers //might //use //their //position //to //make //themselves //better //off //at //the //expense //of
//the /
/shareholders. /
/This /
/agency //conflict //potentially //reduces //the //profitability //of //the //firm //for //its //shareholders.
Agency //costs //- //verified //answer(s)-
✔✔ Reduction /
/in //a //corporation's //cash //flows //created //by //the //existence //of //the //agency //conflict.
Agency //control //devices //- //verified //answer(s)-
✔✔ are /
/procedures, //contracts //and //organizations //that //corporations //can //use //to //guide //managers //to
//focus //on //their //fiduciary //duties //and //limit //opportunistic //behavior.
Internal //Control //Devices //- //verified //answer(s)-
✔✔ Controls /
/on /
/managers /
/that /
/exist /
/within /
/the //corporation. //Ex.) //Compensation //contracts, //Board //of //Directors, //Governing //Documents,
//Managers
Compensation //contracts //- //verified //answer(s)-
✔✔ Align /
/managerial /
/compensation /
/with /
/shareholder /
/wealth /
/increases. /
/Difficult /
/to /
/do /
/as /
/the /
/structure /
/of /
/the /
/the /
/government, /
/and /
/acts /
/under /
/the //structures //set //forth //in //the //Articles //of //Incorporation //and //the //corporations //By //Laws.
Managers //- //verified //answer(s)-
✔✔ The /
/managers /
/compete //for //recognition //and //promotions. //They //thus //have //an //incentive //to //highlight //poor
//or //unethical //conduct //in //their //peers.
External //Control //Devices //- //verified //answer(s)-
✔✔ Controls /
/on /
/managers /
/that /
/exist /
/outside /
/of /
/the /
/corporation. /
/Ex.) //Government //Regulation, //External //Audits, //Hostile //takeover, //Institutional //Investors
Government //Regulation //- //verified //answer(s)-
✔✔ Corporations //are //subject //to //Federal //and //State //security //regulations, //including //detailed
//public //reports //of //their //performance.
External //Audits //- //verified //answer(s)-
✔✔ Publicly //traded //corporations //must //be //audited //by //independent //auditors //on //an //annual
//basis.
Hostile //takeover //- //verified //answer(s)-
✔✔ Outsiders /
/may //gain //sufficient //shares //in //a //corporation //to //get //control //and //expel //existing //managers.
Institutional //Investors //- //verified //answer(s)- ✔✔ Large //financial //companies—
Commercial /
/and /
/Investment //banks, //pension //funds, //insurance //companies, //hedge //funds //and //mutual //funds
have /
/large /
/investments /
/in /
/corporations /
/and /
/are //"active" /
/investors //who //can //put //pressure //on //the //board //and //managers //to //improve //performance.
Corporate //social //responsibility //(CSR) //- //verified //answer(s)-
✔✔ A /
/corporation's /
/responsibility /
/for /
/its /
/effects /
/on /
/environmental /
/and /
/social /
/wellbeing, //often //involving //efforts //that //go //beyond //what //may //be //required //by //regulation.
UNIT // 6 //- //verified //answer(s)- ✔✔
/with /
/the //same //cash //flow //for //each //period //of //time. //Level //annuities //are //further //classified //as //to
//when //the //payments //are //made //in //each //period.
Ordinary //annuity //- //verified //answer(s)- ✔✔ Payments //ccur //at //the //end //of //each //period.
Annuity //due //- //verified //answer(s)- ✔✔ Payments //occur //at //the //beginning //of //each //period.
Growing //annuity //- //verified //answer(s)-
✔✔ An //annuity //where //payments //grow //at //a //steady //rate.
Perpetuity //- //verified //answer(s)-
✔✔ A //series //of //regular //payments //for //regular //periods //that //go //on //indefinitely.
Level //perpetuity //- //verified //answer(s)-
✔✔ Perpetual //payments //of //the //same //amount //at //regular //intervals
Growing //perpetuity //- //verified //answer(s)-
✔✔ Perpetual //payments //where //the //amounts //grow //at //a //constant //rate.
Compounding //period //- //verified //answer(s)-
✔✔ The /
/length //of //time //that //passes //before //interest //is //recognized //and //added //to //the //principle.
Stated //annual //interest //rate //- //verified //answer(s)-
✔✔ The /
/interest /
/rate /
/stated /
/on /
/an /
/annual /
/basis. /
/This /
/is /
/the /
/rate /
/normally /
/used //in //contacts, //including //loans //such //as //credit //cards, //auto //loans //and //mortgages.
Periodic //interest //rate //- //verified //answer(s)-
✔✔ The /
/interest /
/per /
/period, /
/such /
/as /
/the /
/semiannual //rate //for //bond //interest //payments //and //the //quarterly //rate //paid //via //dividends.
Effective //annual //interest //rate //- //verified //answer(s)-
✔✔ The //annual //interest //rate //that //reflects //the //impact //of //intra-year //compounding.
UNIT // 7 //- //verified //answer(s)- ✔✔
Probability //distribution //- //verified //answer(s)-
✔✔ A /
/formula /
/or /
/table /
/of /
/information /
/that /
/gives /
/process /
/of /
/reducing /
/the //risk //of //a //portfolio //by //holding //assets //whose //returns //are //not //perfectly //correlated.
Joint //probability //distribution //- //verified //answer(s)-
✔✔ A //probability //distribution //containing //the //likelihood //of //two //events //occurring //together
Expected //return //of //a //portfolio //- //verified //answer(s)- ✔✔ The //wealth-
weighted //average //of //the //returns //expected //from //the //assets //held //in //the //portfolio.
Portfolio //variance //- //verified //answer(s)- ✔✔ The //combination //of //the //wealth-
weighted //average //of //the //variances //of //the //two //assets //and //their //covariance.
Covariance //- //verified //answer(s)-
✔✔ A //statistical //measure //of //the //degree //to //which //two //rates //of //return //move //together.
Correlation //coefficient //- //verified //answer(s)-
✔✔ Measures /
/not /
/only /
/the /
/direction /
/of //covariability //(positive //or //negative) //but //also //the //strength //of //the //relationship.
Unique //risk //- //verified //answer(s)-
✔✔ The /
/risk /
/that /
/is /
/unique /
/to /
/an /
/individual /
/company. /
/Unique //risk, //varying //from //company //to //company, //is //the //risk //that //can //be //diversified.
Market //risk //- //verified //answer(s)-
✔✔ The /
/risk /
/that /
/affects /
/all /
/companies /
/in /
/the /
/economy. /
/Market /
/risk, /
/because /
/it /
/affects /
/all /
/market /
/participants, /
/cannot /
/be /
/diversified /
/away //and //thus //the //risk //that //is //relevant //for //determining //the //opportunity //cost.
Hedge //funds //- //verified //answer(s)-
✔✔ alternative /
/investments /
/using /
/pooled /
/funds /
/that /
/employ /
/(either /
/in /
/an /
/absolute /
/sense /
/or /
/over //
a /
/specified /
/market /
/benchmark). /
/It /
/is /
/important /
/to /
/note /
/that /
/hedge /
/funds /
/are /
/generally /
/only /
/accessible //to //accredited //investors //as //they //require //less //SEC //regulations //than //other //funds.
//One /
/aspect /
/that /
/has /
/set /
/the /
/hedge /
/fund /
/industry /
/apart /
/is /
/the /
/fact /
/that /
/hedge /
/funds /
/face //less //regulation //than //mutual //funds //and //other //investment //vehicles. //Investopedia.com
mutual //fund //- //verified //answer(s)-
✔✔ an /
/investment /
/vehicle /
/made /
/up /
/of //
a /
/pool /
/of /
/moneys /
/collected /
/from /
/many /
/investors /
/for /
/the //purpose //of //investing //in //securities //such //as //stocks, //bonds, //money //market //instruments
//and /
/other /
/assets. /
/Mutual /
/funds /
/are /
/operated /
/by /
/professional /
/money /
/managers, /
/who /
/allocate /
/the /
/fund's /
/investments /
/and /
