Question: An investor is considering buying one of two 10-year, $1,000 face value, noncallable bonds: Bond A has a 7% annual coupon, while Bond B has a 9% annual coupon. Both bonds have a yield to maturity of 8%, and the YTM is expected to remain constant for the next 10 years. Which of the following statements is CORRECT?
a. Bond B has a higher price than Bond A today, but one year from now the bonds will have the same price.
b. One year from now, Bond A’s price will be higher than it is today.
Answer Options:
a. False
b. True
Answer: b. True
Question: Bonds A, B, and C all have a maturity of 10 years and a yield to maturity of 7%. Bond A’s price exceeds its par value, Bond B’s price equals its par value, and Bond C’s price is less than its par value. None of the bonds can be called. Which of the following statements is CORRECT?
a. If the yield to maturity on each bond decreases to 6%, Bond A will have the largest percentage increase in its price.
b. Bond A has the most price risk.
c. If the yield to maturity on the three bonds remains constant, the prices of the three bonds will remain the same over the next year.
d. If the yield to maturity on each bond increases to 8%, the prices of all three bonds will decline.
e. Bond C sells at a premium over its par value.
Answer Options:
a. False
b. False
c. True
d. True
e. False
Answer: d. True
Question: Which of the following is true with respect to the right of a grand jury prior to prosecuting an individual of a serious crime?
Answer Options:
It is a open public hearing.
The right to a grand jury has not been extended to state criminal cases.
The decision of the grand jury must be unanimous.
The defendant has an opportunity to make his or her case.
Answer: The right to a grand jury has not been extended to state criminal cases.
Question: Florence discovers Florence’s finest nursery and as she is admiring the flowers growing out of soil in the ground. She stops and wonders what is true about real/personal property. She concludes?
Answer Options:
Some real property can be converted to personal property.
Property right in personal property is the same as property right in real property.
A patent right is not personal property.
Real property can never be converted into personal property.
Answer: Some real property can be converted to personal property.
Question: Which is true with respect to a supermarket coupon?
If it is published in a newspaper, it is binding on the supermarket.
It creates a quasi contract between the customer and the supermarket.
It is binding on the supermarket if a customer presents it.
It is not an offer.
Answer: It is binding on the supermarket if a customer presents it.
Question: Bitcoins are subject to a legally imposed quota. Molly violates the legally imposed quota. Miranda who already purchased her legal quota of bitcoins enters into a contract with Molly to secretly purchase the bitcoins she knows were illegally obtained by Molly. When Molly and Miranda meet, Miranda refuses to purchase the bitcoins. What is the probable outcome?
Molly cannot sue Miranda because the contract is void.
The parties entered into a contract that is voidable by Miranda.
Molly can sue Miranda because there is a valid contract due to freedom of contract.
Molly can sue Miranda because they entered an enforceable bilateral contract.
Answer: Molly cannot sue Miranda because the contract is void.
Question: Full faith and credit relates to which of the following?
Answer Options:
A non-resident of a state being subject to the traffic laws of a state in which he or she is traveling.
The authority of a state court to prosecute a resident of another state for a crime committed in another state.
The authority of a state court to enforce a civil judgment rendered in State B against a resident of State A.
The right to travel freely in any state.
Answer: The authority of a state court to enforce a civil judgment rendered in State B against a resident of State A.
Question: Which of the following is true with respect to a uniform code, such as the Uniform Commercial Code?
Answer Options:
It is state statutory law.
It is state common law.
It is federal statutory law.
It is federal regulatory law.
Answer: It is state statutory law.
Question: The significance of watered stock is which of the following?
A shareholder has acquired overvalued stock based on the overvaluation of a contribution of property in exchange for stock.
Any stock acquired for property.
It provides cumulative voting rights.
It is stock placed in a voting trust.
Answer: A shareholder has acquired overvalued stock based on the overvaluation of a contribution of property in exchange for stock.
Question: Which of the following is true with respect to personal property?
Personal property can never be converted to real property.
If real property is converted to personal property, the contract for sale must be in writing.
Intangible property is not personal property.
Some personal property can be converted to real property.
Answer: Some personal property can be converted to real property.
Question: Which of the following is true with respect to credit counseling in bankruptcy?
It occurs at the 341 meeting.
It is required of the debtor following the discharge.
In order to file for bankruptcy, the debtor must seek credit counseling as a prerequisite to filing.
It is an optional benefit available to the debtor.
Answer: In order to file for bankruptcy, the debtor must seek credit counseling as a prerequisite to filing.
Question: Victor E. Lapp a shareholder of a close corporation decides to retire and dispose of his stock. Which of the following is he most likely to do?
Ask the SEC for permission to sell his stock.
Do nothing – when Victor dies is the only time he will be able to sell his stock.
Sell his stock on a stock exchange.
Sell his stock under the terms of a buy-sell agreement.
Answer: Sell his stock under the terms of a buy-sell agreement.
Question: Tucker Corporation is planning to issue new 20-year bonds. The current plan is to make the bonds non-callable, but may be changed. If the bonds are made callable after 5 years at a 5% call premium, how would this affect their required rate of return?
a. Because of the call premium, the required rate of return would decline.
b. There is no reason to expect a change in the required rate of return.
c. The required rate of return would decline because the bond would then be less risky to a bondholder.
d. The required rate of return would increase because the bond would then be more risky to a bondholder.
e. It is impossible to say without more information.
Answer Options:
a. False
b. False
c. False
d. True
e. False
Answer: d. True
Question: Miranda Wrights wanders into a coffee shop. Sipping a latte at a table, her friend Hugh who is also in the coffee shop tells her that he accidently received an email to her which Goldie accepted Miranda’s offer to buy her car for $10,000. Which of the following is true?
Because Miranda is unaware that Molly accepted her offer, it is deemed to be accepted.
Since Miranda did not actually receive the email, the offer is not deemed to be accepted.
In order for the offer to be accepted, Hughes would have to forward the email to Miranda.
Offers cannot be accepted by email.
Answer: Since Miranda did not actually receive the email, the offer is not deemed to be accepted.
Question: Mollie and Miranda are ice skating together. Miranda is a beginning ice skater and not sure on her feet. Mollie is a more expert ice skater and when Miranda turns awkwardly, Mollie playfully pushes Miranda who falls on the ice. Unable to get out of the way, two other skaters fall over Miranda. Miranda and the two skaters break their arms. Which of the following is true?
Answer Options:
Mollie committed the tort of battery and is responsible for the injuries of Miranda and the two skaters.
Mollie committed the tort of battery with respect to Miranda and is responsible for her injuries and Miranda committed the tort of battery with respect to the two skaters and is responsible for their injuries.
Mollie was negligent and is responsible only for Miranda’s injuries because the two skaters falling over Miranda was unforeseeable.
Mollie committed the tort of battery and is only responsible for Miranda’s damages because she pushed Miranda and did nothing to the other skaters.
Answer: Mollie committed the tort of battery and is responsible for the injuries of Miranda and the two skaters.
Question: Which of the following statements is CORRECT?
a. If a bond is selling at a discount, the yield to call is a better measure of return than is the yield to maturity.
b. On an expected yield basis, the expected capital gains yield will always be positive because an investor would not purchase a bond with an expected capital loss.
c. On an expected yield basis, the expected current yield will always be positive because an investor would not purchase a bond that is not expected to pay any cash coupon interest.
Answer Options:
a. True
b. False
c. False
Answer: a. True
Question: Miranda Wrights, age 90, has a life estate in a home located in Clearwater. She offers her life estate for sale to Molly Cule, age 25. Excitedly, she decides to buy it and shares the good news with Goldie Locke who is a student in BL 3320. Goldie’s response is which of the following?
Answer Options:
Since you are only 25, you will be able to occupy the home for a long time.
Miranda is only able to sell a tenant in common interest.
The life estate will end upon Miranda’s death.
Under no circumstances can a life tenant sell a life estate.
Answer: The life estate will end upon Miranda’s death.
Question: Original Jurisdiction means which of the following?
Answer Options:
It is a court in which a case is first heard.
It is a court to which a case is appealed.
It is jurisdiction limited to federal court.
It is jurisdiction limited to a specialty court.
Answer: It is a court in which a case is first heard.
Question: In which type of bankruptcy is a repayment plan necessary?
Repayment plans are not necessary in any bankruptcy.
Chapter 13.
Both Chapter 13 and Chapter 7.
Chapter 7.
Answer: Chapter 13.