Business Law II-Exam 5 (Chapters 36, 37, 44)

Parents may not disinherit their minor children without good reason. (True or False)

False

Peggy's credit card debts are mounting as her costs of insurance and fuel have dramatically increased and her income, from sporadic free-lance jobs, has dropped. Chapter 13 of the Bankruptcy Code will allow her to reorganize her debt while she keeps most of her assets. (True or False)

False

The "tipper" of inside information can be convicted of a crime, but the "tippee" cannot. (True or False)

False

The Securities Act of 1933 established the Securities and Exchange Commission. (True or False)

False

The Uniform Probate Code has been adopted in all states. (True or False)

False

The only function of a will is to dispose of a person's property upon death. (True or False)

False

Bankruptcy is regulated by federal law. (True or False)

True

Any securities offerings covered by the NSMIA must comply with state securities laws. (True or False)

False

Chapter 7 bankruptcy petitions may only be filed voluntarily. (True or False)

False

Alimony and child support obligations are considered priority claims. (True or False)

True

Property of a person who dies without a will is distributed according to intestacy laws. (True or False)

True

Reva prepares and signs a document that she intends to be her will. If she has not followed the legal technicalities of her state regarding executing a will, the court may not enforce the will. (True or False)

True

The 1934 Act requires companies with a class of stock that is publicly traded to make ongoing, regular disclosure with the SEC (True or False).

True

The SEC has enforcement powers, including the power to issue cease and desist orders, to levy fines, and to confiscate profits from illegal transactions. (True or False)

True

To recover for an alleged violation of SEC Rule 10b-5, a plaintiff is required to prove reliance on a misstatement or omission relative to the purchase of the security. (True or False)

True

Typically, exemptions under the 1933 Act are based on either the type of security or the type of transaction. (True or False)

True

Which is true of an inter vivos trust? a) It is created by a will. b) The grantor cannot serve as trustee. c) It is established while the grantor is still alive. d) Such a trust is not revocable.

c) It is established while the grantor is still alive.

Link negligently ran his car into John, causing $50,000 in injuries. Link was intoxicated at the time of the accident. Can Link discharge this debt in bankruptcy? a) Yes, claims based on negligence are dischargeable b) Yes, as long as he didn't intend to hit John's car c) No, such claims are not dischargeable in bankruptcy d) No, because Link breached a fiduciary duty

c) No, such claims are not dischargeable in bankruptcy

A later will revokes a prior will only if that revocation is clearly stated. (True or False)

False

Brad was having financial difficulties and thought bankruptcy might be in his future. He transferred his sports car to his brother with the agreement that if he didn't file for bankruptcy within the next 18 months, his brother would return the car to him. Brad did file for bankruptcy in ten months. The bankruptcy trustee can bring the car back into Brad's estate for the purpose of providing assets for Brad's creditors. (True or False)

True

Creditor claims are divided into classes, and the highest class must be satisfied in full before going to the next category. (True or False)

True

Estate planning has two primary goals: to ensure property is distributed as the owner desires and to minimize estate taxes. (True or False)

True

Generally, filing bankruptcy stops the collection activity of creditors. (True or False)

True

Individual debtors are allowed to keep some assets in a Chapter 7 bankruptcy. (True or False)

True

Jacob has been quite ill. When three of his neighbors come to visit one day, he tells them that he is dying and that he wants them to witness his oral will. In some states, he can validly dispose of his personal property by his witnessed, oral statements. (True or False)

True

Which of the following is true about wills? a) A will can be amended to change specific terms by execution of a codicil. b) The testatrix cannot disinherit her minor children without stating a reason in the will. c) If the will meet the legal technicalities, the surviving spouse cannot override it. d) Once a will is written, it cannot be changed.

a) A will can be amended to change specific terms by execution of a codicil.

Myron had two children, Cheryl and Pete, who predeceased him. Cheryl had three children and Pete had one child. Myron had a will. Which of the following is true? a) If Myron's will indicates that the issue are to inherit per stirpes, Pete's child will receive one-half of Myron's estate. b) If Myron's will indicates that the issue are to inherit per stirpes, Pete's child will receive one-fourth of Myron's estate. c) If Myron's will indicates that the issue are to inherit per capita, Pete's child will receive one-half of Myron's estate. d) If Myron's will indicates the issue are to inherit per capita, each of Cheryl's children will receive one-sixth of Myron's estate.

a) If Myron's will indicates that the issue are to inherit per stirpes, Pete's child will receive one-half of Myron's estate.

Under Regulation D, institutions such as banks and insurance companies are considered to be what type of investors? a) accredited b) unaccredited c) restricted d) unrestricted

a) accredited

If Walter becomes incompetent to manage his affairs, a) his chosen attorney-in-fact can make decisions for him if he appointed the person in a durable power of attorney with a springing power to become effective upon Walter's incompetence. b) a court will allow an immediate family member to manage his affairs. c) his will becomes effective, and his executor or executrix will manage his business and personal decisions. d) his property will be placed in a trust until such time as he is able to manage his affairs himself.

a) his chosen attorney-in-fact can make decisions for him if he appointed the person in a durable power of attorney with a springing power to become effective upon Walter's incompetence.

The 1934 Act is primarily intended to a) maintain the integrity of the secondary market for securities b) make sure companies who wish to raise money by the sale of securities comply with disclosure requirements for the initial offering c) coordinate federal and state laws with primary emphasis on allowing the individual states to maintain primary control over securities law d) broaden the SEC's enforcement power

a) maintain the integrity of the secondary market for securities

The correct order of payment of claims from the debtor's estate would be a) secured claims, priority claims, unsecured claims b) secured claims, unsecured claims, priority claims c) priority claims, secured claims, unsecured claims d) priority claims, unsecured claims, secured claims

a) secured claims, priority claims, unsecured claims

Pursuant to a public offering, a CPA firm audited the financial statements. After the offering, omissions and misstatements were found. The CPA firm is now being sued by the purchasers of the stock. The purchasers are alleging that the erroneous financial statements in the registration statement caused them to suffer monetary loss. The CPA firm can avoid liability if it can prove a) that it used due diligence in auditing the financial statements b) the corporation was the party who made misstatements and omissions c) the firm believed that the statements were accurate d) None of these will avoid liability

a) that it used due diligence in auditing the financial statements

Which of the following is a primary goal of the Bankruptcy Code? a) to preserve as much of the debtor's property as possible b) to pay off the debtor's creditors as quickly as possible c) to secure debt counseling for the debtor d) to keep the debtor from falling behind in payments

a) to preserve as much of the debtor's property as possible

Iris received a discharge under a Chapter 7 bankruptcy. She cannot receive another discharge under Chapter 7 for at least: a) six years after the prior filing b) eight years after the prior filing c) ten years after the prior discharge d) She cannot file another Chapter 7, but could file a Chapter 11 or 13 bankruptcy

b) eight years after the prior filing

Forever Yours, Inc. has a secured and perfected security interest in Sally's big-screen TV. On the filing date of Sally's Chapter 7 petition, the balance of the debt owed to Forever Yours is $2,000. The value of the TV is estimated at $1,500. This means that Forever Yours: a) is secured for the entire debt, $2,000 b) is unsecured for $500, the excess of the debt over the value of the TV c) has a high-priority claim of $500. This means that Forever YOurs, Inc. will be allowed $500 worth of other unsecured property before other unsecured creditors get anything d) is unsecured for the entire debt

b) is unsecured for $500, the excess of the debt over the value of the TV

Kathleen filed for voluntary bankruptcy and the automatic stay went into effect. The automatic stay: a) acts to automatically discharge Kathleen's debts b) prohibits creditors from collecting debts against Kathleen that arose before she filed bankruptcy c) stops only secured creditors from taking any act to collect, assess, or recover a claim against Kathleen that arose before she filed bankruptcy d) stops creditors from trying to collect from Kathleen, but it does not stop them from filing lawsuits against her

b) prohibits creditors from collecting debts against Kathleen that arose before she filed bankruptcy

Legal requirements for a will depend on state law, but generally include all but which of the following? a) a writing b) signatures of at least three witnesses c) the testator's signature d) witnesses who will not inherit under the will

b) signatures of at least three witnesses

A criminal case under the Securities Act of 1933 is prosecuted by a) the SEC b) the Justice Department c) the Department of the Treasury d) the FTC

b) the Justice Department

Pamela applies for life insurance policy with Forever Young Insurance Company. When completing the application form about past surgeries, Pamela forgot about a past outpatient surgery when she had an infected hang-nail removed and her toe treated. One year after issuing the policy, Pamela died suddenly from a brain aneurysm. Forever Young denies payment under the policy based on misrepresentation. If Pamela's sister, Paula, sues Forever Young, she will most likely a) win, because once an application has ben accepted, an issurer may not use a misrepresentation on the application to avoid liability b) win, because Pamela's misrepresentation was not a material fact and did not increase Forever Young's risk in insuring Pamela's life c) lose, because Pamela's application contained a misrepresentation of material fact d) lose, because an issurer can always use any misrepresentation on an application to avoid paying

b) win, because Pamela's misrepresentation was not a material fact and did not increase Forever Young's risk in insuring Pamela's life

Which of the following is NOT required to create a valid trust? a) legal age and sound mind of the grantor b) witnesses c) a beneficiary(ies) d) property transferred to the trust

b) witnesses

Section 16 of the 1934 Act address what type of insider trading? a) classic insider trading b) tipping c) short-swing trading d) takeovers

c) short-swing trading

Darcy buys a life insurance policy on her own life, under which she pays the annual premiums. The insurance is issued for a specific period but is renewable for similar periods. Darcy is covered only as long as she makes the payment. There is no cash value portion to the policy. Darcy probably owns a) whole life insurance b) key-person life insurance c) term life insurance d) an annuity

c) term life insurance

Felicity brought a lawsuit under Section 11 of the 1933 Act against Mojo Corp. What will Felicity have to prove in order to prevail? a) only that she relied on the registration statement b) that Mojo was negligent in preparing the registration statement c) that there was a material misstatement or omission in the registration statement and she lost money d) that Mojo intentionally tried to deceive investors

c) that there was a material misstatement or omission in the registration statement and she lost money

Which is an example of a priority claim? a) alimony b) income tax c) child support d) All of these are correct

d) All of these are correct

Under the Uniform Anatomical Gift Act, a) an individual may indicate the desire to be an organ donor by putting a provision in his will. The provision will take effect after probate of the will. b) the willingness to be an organ donor may be indicated by signing an organ donation card in the presence of one disinterested witness. c) family members of a decedent have no right to make a gift of the decedent's organs if the decedent did not make an affirmative indication of the desire to be a donor during her lifetime. d) an effective donation may be made by an individual in a will or on a witnessed organ-donation card or by family members after the person's death as long as the person did not indicate a desire not to be a donor.

d) an effective donation may be made by an individual in a will or on a witnessed organ-donation card or by family members after the person's death as long as the person did not indicate a desire not to be a donor.

The person who receives the proceeds from an insurance policy is the a) owner b) testator c) insurer d) beneficiary

d) beneficiary

When a stock underwriter acts as the company's agent in selling stock, it is called a: a) company underwriting b) express underwriting c) firm commitment underwriting d) best efforts underwriting

d) best efforts underwriting

Agnes plans to file for bankruptcy under Chapter 7. One month prior to filing, Agnes gives Joe's Filling Station $700 to apply to her gas bill. Joe has been so kind to let her charge the gas she needed for her car over the past year. The bankruptcy trustee appointed to the case: a) can cancel the payment to Joe as a fraudulent transfer b) cannot cancel the payment to Joe because it is payment for an existing debt c) cannot cancel the payment to Joes because he is not an insider d) can cancel the payment to Joe as a voidable preference

d) can cancel the payment to Joe as a voidable preference

In order to travel extensively and not worry about handling her affairs, Lee transfers most of her assets into a trust, with her bank serving as trustee. She has created a(n)_____ trust. a) travel b) testamentary c) constructive d) inter vivos

d) inter vivos

Under the 1934 Act, an issuer must register with the SEC if: a) it has not completed a public offering under the 1933 Act b) its securities are not going to be traded on a national exchange c) it will not be providing investors with a prospectus d) it has at least 2,000 shareholders and total assets that exceed $10 million

d) it has at least 2,000 shareholders and total assets that exceed $10 million

The cheapest life insurance option is a) straight life insurance b) whole life insurance c) casualty insurance d) term insurance

d) term insurance

Who is responsible for gathering the bankrupt's assets and dividing them among creditors? a) the executor b) the state court c) the creditors' committee d) the trustee

d) the trustee