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Questions and Answers
Who is referred to as the purchaser in relation to a traveler's check?
What distinguishes a demand draft from other types of drafts?
What is a characteristic of an Automatic Bank Draft (ABD)?
What is the primary benefit of the Warehouse Receipt System (WRS)?
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Which type of draft is issued by a bank in a single country for local transactions?
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What is a Warehouse Receipt (WR) primarily used for?
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Which type of check is certified by the bank regarding funds availability?
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Which of the following is NOT an advantage of trading through barter exchanges?
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What does a personal check represent?
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Which of the following benefits of barter exchanges helps in making idle time productive?
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What characteristic defines a traveler's check?
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In which case would a business check be used?
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What is the primary purpose of municipal bonds?
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What is a common function of money reflected in the context of barter exchanges?
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What characterizes mortgage-backed bonds?
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Which type of dividend involves non-cash assets?
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What distinguishes debenture bonds from secured bonds?
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Which bond pays interest rates based on an inflation index?
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What do liquidating dividends represent?
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Which of the following is NOT a type of dividend?
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What are stock options intended for?
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What is a potential disadvantage of storing value in certain monetary systems?
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Which type of debit card is primarily associated with checking accounts?
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What is one distinct advantage of barter systems?
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Which account type generally has a higher maintaining balance requirement?
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What is an essential factor when preparing retained earnings for a new year?
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Which type of business organization does NOT include service-oriented purposes?
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What is a defining characteristic of the banking and finance industry?
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Which of the following industries is primarily involved in extracting natural resources?
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What is the primary function of money as a medium of exchange?
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Which of the following is characteristic of a good medium of exchange?
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What type of money is defined as having value because the government decrees it to be legal tender?
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Which statement accurately describes fiduciary money?
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What is meant by the term 'means of deferred payment' in relation to money?
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Which of the following components is NOT required on a check?
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Which characteristic of money refers to the ability to be easily transported and handled?
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In the context of a check, who is referred to as the 'drawee'?
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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.