Financial Management: Municipal Bonds
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Financial Management: Municipal Bonds

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Questions and Answers

Who is referred to as the purchaser in relation to a traveler's check?

  • The person receiving the traveler's check
  • The bank issuing the traveler's check
  • The person buying the traveler's check (correct)
  • The person selling the goods or services
  • What distinguishes a demand draft from other types of drafts?

  • It is only payable on a specified date.
  • It is payable upon demand or on sight. (correct)
  • It can only be used for international transactions.
  • It requires additional verification before payment.
  • What is a characteristic of an Automatic Bank Draft (ABD)?

  • It can only be set for a single transaction.
  • It involves manual payment every month.
  • It is only useful for international payments.
  • It electronically deducts money from the payer's account at regular intervals. (correct)
  • What is the primary benefit of the Warehouse Receipt System (WRS)?

    <p>Offers easy access to finance and lowers financing costs.</p> Signup and view all the answers

    Which type of draft is issued by a bank in a single country for local transactions?

    <p>Local Draft</p> Signup and view all the answers

    What is a Warehouse Receipt (WR) primarily used for?

    <p>To serve as evidence of goods stored in a warehouse</p> Signup and view all the answers

    Which type of check is certified by the bank regarding funds availability?

    <p>Certified check</p> Signup and view all the answers

    Which of the following is NOT an advantage of trading through barter exchanges?

    <p>Increase in marketing expenses</p> Signup and view all the answers

    What does a personal check represent?

    <p>Funds drawn against the individual's checking account</p> Signup and view all the answers

    Which of the following benefits of barter exchanges helps in making idle time productive?

    <p>Eliminating billing hassle</p> Signup and view all the answers

    What characteristic defines a traveler's check?

    <p>It is preprinted and has a fixed amount</p> Signup and view all the answers

    In which case would a business check be used?

    <p>When a company pays its suppliers</p> Signup and view all the answers

    What is the primary purpose of municipal bonds?

    <p>To fund municipal projects like roads and bridges</p> Signup and view all the answers

    What is a common function of money reflected in the context of barter exchanges?

    <p>To facilitate transactions by serving as a medium of exchange</p> Signup and view all the answers

    What characterizes mortgage-backed bonds?

    <p>They are secured by collateral in the form of mortgages</p> Signup and view all the answers

    Which type of dividend involves non-cash assets?

    <p>Property dividends</p> Signup and view all the answers

    What distinguishes debenture bonds from secured bonds?

    <p>Debenture bonds are unsecured but backed by issuer's reputation</p> Signup and view all the answers

    Which bond pays interest rates based on an inflation index?

    <p>Indexed bonds</p> Signup and view all the answers

    What do liquidating dividends represent?

    <p>Return of capital to shareholders</p> Signup and view all the answers

    Which of the following is NOT a type of dividend?

    <p>Revenue dividends</p> Signup and view all the answers

    What are stock options intended for?

    <p>Allowing stockholders to purchase additional shares</p> Signup and view all the answers

    What is a potential disadvantage of storing value in certain monetary systems?

    <p>Values can degrade over time due to inflation.</p> Signup and view all the answers

    Which type of debit card is primarily associated with checking accounts?

    <p>Current Account Debit Card</p> Signup and view all the answers

    What is one distinct advantage of barter systems?

    <p>No reliance on currency is required.</p> Signup and view all the answers

    Which account type generally has a higher maintaining balance requirement?

    <p>Current Account</p> Signup and view all the answers

    What is an essential factor when preparing retained earnings for a new year?

    <p>Adding dividends to the ending balance from the previous year.</p> Signup and view all the answers

    Which type of business organization does NOT include service-oriented purposes?

    <p>Manufacturing Companies</p> Signup and view all the answers

    What is a defining characteristic of the banking and finance industry?

    <p>Enhancing the flow of money and financial services.</p> Signup and view all the answers

    Which of the following industries is primarily involved in extracting natural resources?

    <p>Mining/Extractive Industry</p> Signup and view all the answers

    What is the primary function of money as a medium of exchange?

    <p>It facilitates the trade of goods and services.</p> Signup and view all the answers

    Which of the following is characteristic of a good medium of exchange?

    <p>Should possess scarcity.</p> Signup and view all the answers

    What type of money is defined as having value because the government decrees it to be legal tender?

    <p>Fiat Money</p> Signup and view all the answers

    Which statement accurately describes fiduciary money?

    <p>It relies on trust for its value.</p> Signup and view all the answers

    What is meant by the term 'means of deferred payment' in relation to money?

    <p>It allows for payments that can be made in the future.</p> Signup and view all the answers

    Which of the following components is NOT required on a check?

    <p>Account balance</p> Signup and view all the answers

    Which characteristic of money refers to the ability to be easily transported and handled?

    <p>Portability</p> Signup and view all the answers

    In the context of a check, who is referred to as the 'drawee'?

    <p>The bank where the account is held.</p> Signup and view all the answers

    Study Notes

    Municipal Bonds

    • Long-term instruments issued by municipalities for financing infrastructure projects such as roads, bridges, and sewage plants.

    Lease-to-Buy

    • Lease agreements allowing lessees the option to purchase the property after a specified period.

    Mortgage-backed Bonds

    • Bonds secured by mortgages, providing lenders with collateral for their investment.

    Indexed or Purchasing Power Bonds

    • Interest rates tied to an inflation index, like the Consumer Price Index, to protect against inflation.

    Dividends

    • Share of profits distributed to shareholders, classified as:
      • Cash dividends: specific amount per share.
      • Stock dividends: additional shares issued based on ownership.
      • Property dividends: distribution of non-cash assets.
      • Liquidating dividends: return of capital, often in liquidation events.

    Stock Options

    • Pre-emptive rights allowing existing shareholders to buy additional shares to maintain ownership proportion.

    Corporate Bonds

    • Types of corporate bonds include:
      • Secured bonds: backed by collateral or assets, like mortgages.
      • Debenture bonds: unsecured, relying on issuer's creditworthiness.

    Warehouse Receipt (WR)

    • Document certifying the goods stored in a warehouse; can serve as collateral for loans.

    Types of Checks

    • Personal Check: Issued by individuals against their checking accounts.
    • Business Check: Issued by companies, also drawn from their checking accounts.
    • Cashier's/Manager's Check: Issued by a bank, guaranteeing payment.
    • Certified Check: Personal check verified for funds availability.
    • Traveler's Check: Prepaid check for travel; easily redeemable internationally.

    Functions of Money

    • Acts as a medium of exchange, standard of value, store of value, and means of deferred payment in legal transactions.

    Good Medium of Exchange Characteristics

    • Scarcity: Rarity or difficulty in obtaining the medium.
    • Divisibility: Ability to divide into smaller units for transactions.
    • Portability: Ease of transport and handling.
    • Durability: Long-lasting physical properties.

    Parties to a Check

    • Maker: The individual or entity writing the check.
    • Drawee: The bank where the check account is maintained.
    • Payee: The individual or entity receiving payment.

    Types of Bank Drafts

    • Demand Draft: Payable upon immediate presentation.
    • Time Draft: Payable at a future date.
    • Local Draft: Used for local transactions within a single country.
    • International Draft: Valid for transactions across borders.
    • Automatic Bank Draft (ABD): Scheduled electronic withdrawals from accounts.

    Warehouse Receipt System Benefits

    • Provides easier finance access, lowers transaction costs, enhances storage efficiency, and potentially increases producer profits.

    Types of Debit Cards

    • Current Account: Checking account for everyday transactions.
    • Savings Account: Account primarily for savings and interest.

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    Description

    This quiz covers key concepts related to municipal bonds, lease-to-buy agreements, and mortgage-backed bonds. Test your understanding of how these financial instruments are used to fund municipal projects and the intricacies of secured bonds. Explore various bond types including indexed bonds.

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