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6 multiple-choice questions with explained answers
Choose an answer on paper, then open the reasoning. These examples come from the same public practice banks used above. Follow the lesson link when you need to rebuild a concept.
01 · Law 1: The Language of Money
Which of the following represents the fundamental Accounting Equation?
Assets = Liabilities − Equity
Assets + Liabilities = Equity
Assets = Liabilities + Equity
Revenue − Expenses = Assets
Show answer and reasoning for question 1
Answer C: Assets = Liabilities + Equity
Correct. Assets = Liabilities + Equity. This is the bedrock of double-entry accounting. It simply states that everything a business owns (Assets) was fundamentally financed either by borrowing money (Liabilities) or by the owners investing their own money/retaining profits (Equity).
The Compound Annual Growth Rate (CAGR) is best interpreted as:
The average dollar increase each year.
The constant annual growth rate that connects a beginning value to an ending value over time.
The total growth achieved across all periods combined.
The highest year‑over‑year growth rate observed in the period.
Show answer and reasoning for question 3
Answer B: The constant annual growth rate that connects a beginning value to an ending value over time.
Correct. CAGR = (ending value / beginning value)^(1 / number of years) - 1. For positive beginning and ending values, it is the constant annual rate that connects the two. Actual growth can vary each year. For investment returns, intermediate contributions and withdrawals require a cash-flow-aware measure rather than this simple endpoint calculation.
A rental property is expected to generate a one-time cash inflow of $10,000 exactly 3 years from now. If your required return is 8%, what is the present value of that cash flow?
$7,350
$7,938
$8,640
$9,260
Show answer and reasoning for question 4
Answer B: $7,938
Correct. Discount the single future cash flow for three years: PV = $10,000 / (1.08)^3 = $7,938.32, or $7,938 rounded to the nearest dollar.
05 · Law 7: The Only Worthwhile Risks Command Incremental Expected Rewards
A bet has a 30% chance to win $10,000, a 30% chance to win $0, and a 40% chance to incur a $10,000 loss. What is the expected value (EV)?
+$1,000
-$1,000
+$3,000
-$4,000
Show answer and reasoning for question 5
Answer B: -$1,000
Correct. Expected Value = Σ(Probability × Payoff) = (0.30 * $10,000) + (0.30 * $0) + (0.40 * -$10,000) = $3,000 + $0 - $4,000 = -$1,000. Over many iterations, you will lose $1,000 per bet on average.
06 · Law 8: Concentration Creates Unnecessary Fragility
In a two-asset portfolio, 60% is invested in Asset A with an expected return of 12% and 40% in Asset B with an expected return of 6%. What is the portfolio’s expected return?
9.6%
9.0%
10.2%
8.4%
Show answer and reasoning for question 6
Answer A: 9.6%
Correct. Expected portfolio return is the weighted average of the assets’ expected returns: (0.60 × 12%) + (0.40 × 6%) = 7.2% + 2.4% = 9.6%. Correlation affects portfolio risk, not this weighted-average return calculation.
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Choose a public test bank on this page for questions on financial statements, time value of money, forecasting, valuation, risk, and portfolio concepts. The supplemental banks add options, capital structure, working capital, and personal finance. Each question has answer explanations.
How should I use a finance test bank?
Try a topic before reading its answers. Review the reasoning, record the concept you missed, and return to the course lesson. Then take another small set or create a custom practice session. Timed practice can help you manage a study session, but the goal is understanding.
Are these official exam answers or a university qualification?
These are public learning and practice resources from Devon Coombs Academy. They are not a professional licensing exam or a Santa Clara University credential. They do not predict the content or outcome of a graded course exam.
By Devon Coombs, CPA, MBA, Assistant Teaching Professor of Finance and Faculty Director of Real Estate Finance at Santa Clara University. Published independently through Devon Coombs Academy. Updated October 10, 2026.
