Question: Although marijuana is an illegal drug under federal law, some states including Florida have legalized it for some purposes. This raises which of the following issues?
Checks and balances between branches of government
The supremacy clause as it applies to conflicts between federal law and state law.
Full faith and credit.
None of the alternatives are correct
Answer: The supremacy clause as it applies to conflicts between federal law and state law.
Question: Victor E. Lapp purchases a race track from Cubby Bear. Part of the contract includes a provision by which Cubby agrees not to own or be involved in the race track business for 5 years. What are the contractual consequences of that provision?
Answer Options:
Unenforceable because it is unconscionable.
Unenforceable because it is not legally sufficient consideration.
Enforceable as a covenant not to compete.
Unenforceable because Cubby cannot be compelled not to be involved in or to own a race track.
Answer: Enforceable as a covenant not to compete.
Question: Looking at your [phone you notice which of the following?
You are looking at a product with multiple patents, multiple copyrights, and multiple trademarks.
It is impossible to have a product that includes copyrights, patents, and trademarks.
You are looking a product with a single patent.
You are looking at a product with a single patent and copyright.
Answer: You are looking at a product with multiple patents, multiple copyrights, and multiple trademarks.
Question: Mollie and Asher open a CPA firm specializing in the preparation of tax returns. On their letterhead, there is a drawing of a clock set to 10:40. Underneath the clock, there are the words “The time in our firm is always 10:40 am or pm.” This is an example of which of the following?
Answer Options:
A design patent
A copyright
A service mark
A trademark
Answer: A trademark
Question: Goldie Locke’s boss tends to be very critical of her and the staff if the staff does not meet its sales quotas. At the end of work one day, Goldie’s boss told her that she would not get a raise unless she met her monthly sales quota. After work that day, as Goldie is driving home, her car is rear-ended by an inattentive motorist. Goldie suffers back damage and cannot return to work for a month. This stresses Goldie because she believes her boss will blame her for the accident and criticize her even more for not meeting quotas. Goldie sues her boss for intentional infliction of emotional stress. The likely outcome is which of the following?
Answer Options:
Goldie will lose unless the state has a dram act.
Goldie will win because her boss should have known criticizing Goldie would cause stress.
Goldie will lose because her boss did not commit a tort.
Goldie will win because her boss’ criticism is the proximate cause of her stress.
Answer: Goldie will lose because her boss did not commit a tort.
Question: Which of the following statements is CORRECT?
a. If the Federal Reserve unexpectedly announces that it expects inflation to increase, then we would probably observe an immediate increase in bond prices.
b. The total yield on a bond is derived from dividends plus changes in the price of the bond.
c. Bonds are generally regarded as being riskier than common stocks, and therefore bonds have higher required returns.
d. Bonds issued by larger companies always have lower yields to maturity (due to less risk) than bonds issued by smaller companies.
e. The market price of a bond will always approach its par value as its maturity date approaches, provided the bond’s required return remains constant.
Answer Options:
a. False
b. False
c. False
d. False
e. True
Answer: e. True
Question: Lloyd arrested for a crime is informed by his attorney that there will be a preliminary hearing. What can Lloyd expect?
Answer Options:
For jurors to vote on his guilt or innocence.
At the hearing, the judge will decide whether there is probable cause for the prosecution to bring him to trial for the crime.
Only the prosecuting attorney will be allowed to participate.
The standard of proof imposed at the hearing will be beyond a reasonable doubt.
Answer: At the hearing, the judge will decide whether there is probable cause for the prosecution to bring him to trial for the crime.
Question: Bond A has a 9% annual coupon, while Bond B has a 7% annual coupon. Both bonds have the same maturity, a face value of $1,000, an 8% yield to maturity, and are noncallable. Which of the following statements is CORRECT?
a. Bond A’s capital gains yield is greater than Bond B’s capital gains yield.
b. Bond A trades at a discount, whereas Bond B trades at a premium.
c. If the yield to maturity for both bonds remains at 8%, Bond A’s price one year from now will be higher than it is today, but Bond B’s price one year from now will be lower than it is today.
d. If the yield to maturity for both bonds immediately decreases to 6%, Bond A’s bond will have a larger percentage increase in value.
e. Bond A’s current yield is greater than that of Bond B.
Answer Options:
a. False
b. False
c. False
d. True
e. False
Answer: d. True
Question: McDonald’s “You deserve a break today” is an example of which of the following?
Answer Options:
A trade secret.
Trademark.
Copyright.
A design patent.
Answer: Trademark
Question: The benefits of forming an LLC are which of the following?
Limited liability.
None of the alternatives are correct.
More than one alternative is correct.
Ability to decide the manner in which the entity and/or its owners will be taxed.
Answer: More than one alternative is correct.
Question: Victor E. Lapp was so disappointed when he did not win the lottery that he forgot to bring his stock certificate to the annual shareholders meeting. Which of the following is true?
Victor is entitled to all his rights as a shareholder including his right to vote.
Victor must either find his stock certificate or purchase more stock.
Victor cannot vote unless he produces his stock certificate.
Victor loses his right to be a shareholder.
Answer: Victor is entitled to all his rights as a shareholder including his right to vote.
Question: Assume that the economy is in a mild recession, and as a result interest rates and money costs generally are relatively low. The WACC for two mutually exclusive projects that are being considered is 8%. Project S has an IRR of 20% while Project L’s IRR is 15%. The projects have the same NPV at the 8% current WACC. However, you believe that the economy is about to recover, and money costs and thus your WACC will also increase. You also think that the projects will not be funded until the WACC has increased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following statements is CORRECT?
Answer Options:
a. You should delay a decision until you have more information on the projects, even if this means that a competitor might come in and capture this market.
b. You should recommend Project S, because at the new WACC it will have the higher NPV.
c. You should recommend Project L, because at the new WACC it will have the higher NPV.
d. You should recommend Project S, because at the new WACC it will have the higher IRR.
e. You should recommend Project L because it will have both a higher IRR and a higher NPV under the new conditions.
Answer: d
Question: Miranda Wrights enters into a franchise agreement to sell contract textbooks. Her relationship is governed by which of the following?
All the choices are correct.
Contract law.
The Federal franchise rule.
Applicable state statutory law.
Answer Options:
, and
Answer: All the choices are correct
Question, Answer Options, and Correct Answer:
Question: Van Gogh says to Rembrandt, ‘My painting is one I would only consider selling to you.’ This statement is
an implied contract between Van Gogh and Rembrandt.
an offer because Van Gogh indicated he would not sell the painting to anyone else.
a quasi contract.
Not an offer because it was not an expression of interest subject to negotiation.
Answer: Not an offer because it was not an expression of interest subject to negotiation.
Question: Which of the following statements is CORRECT?
a. Sinking fund provisions sometimes turn out to adversely affect bondholders, and this is most likely to occur if interest rates decline after the bond was issued.
b. Most sinking funds require the issuer to provide funds to a trustee, who holds the money so that it will be available to pay off bondholders when the bonds mature.
c. A sinking fund provision makes a bond more risky to investors at the time of issuance.
d. Sinking fund provisions never require companies to retire their debt; they only establish “targets” for the company to reduce its debt over time.
e. If interest rates increase after a company has issued bonds with a sinking fund, the company will be less likely to buy bonds on the open market to meet its sinking fund obligation and more likely to call them in at the sinking fund call price.
Answer Options:
a. True
b. False
c. False
d. False
e. False
Answer: a. True
Question: Select the proper form of the following statement, where B is “I will buy a new computer” and C is “My computer crashes”.
Answer Options:
I will buy a new computer only if my current computer crashes.
B and C
B or C
B if C
none of these
Answer: B if C
Question: In preparing a criminal case against a wrongdoer who committed a tort that is also a crime, the state prosecutor can do which of the following?
Answer Options:
Ask the court to allow the plaintiff’s attorney to join with the prosecution.
Request the judge of the civil case to enter a guilty verdict against the wrongdoer.
The state prosecutor must try the case without any assistance from the plaintiff’s attorney.
Waive his or her right to litigate the case since the plaintiff’s attorney is more familiar with the case.
Answer: The state prosecutor must try the case without any assistance from the plaintiff’s attorney.
Question: Miranda Wrights had a bad experience with her financial advisor. Although he advised Miranda not to purchase a particular stock, she purchased it anyway. In a rant, Miranda posts false statements about the financial advisor accusing him of misrepresenting the quality of the stock she purchased. Twenty-four hours later, Miranda withdrew the post. The financial advisor sues Miranda for libel. The likely outcome is:
Answer Options:
The financial advisor will lose because Miranda’s posting was based on her experience.
The financial advisor will lose because Miranda subsequently removed the post.
The financial advisor will win because Miranda posted the false statements on Facebook.
The financial advisor will win because a financial advisor is not a public figure.
Answer: The financial advisor will win because Miranda posted the false statements on Facebook.
Question: If markets are in equilibrium, which of the following conditions will exist?
a. Each stock’s expected return should equal its realized return as seen by the marginal investor.
b. Each stock’s expected return should equal its required return as seen by the marginal investor.
c. All stocks should have the same expected return as seen by the marginal investor.
d. The expected and required returns on stocks and bonds should be equal.
e. All stocks should have the same realized return during the coming year.
Answer: