Business Law Objective 6.0- Roles Of Financial Institutions Quiz
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Christian has just received his first checking account bank statement. He pulls out his checkbook and looks to find his outstanding checks and deposits and check his balance. What is Christian doing?
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Calculating his deposit slips
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Comparing purchase receipts
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Reconciling the statement
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Writing a third party check
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This quiz assesses knowledge on financial instruments and banking procedures, focusing on managing accounts, using checks, and handling promissory notes. It is designed for learners to understand practical applications in business law, enhancing their financial and legal acumen.
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- 2.
Karen is preparing the daily deposit of checks for her sporting goods business. Which endorsement should she use on the checks to make the deposit?
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Blank
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Restrictive
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Special/Full
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Transfer
Correct Answer
A. Special/FullExplanation
Karen should use the Special/Full endorsement on the checks to make the deposit. This endorsement allows her to deposit the checks into her business account without any restrictions or limitations. It ensures that the funds will be credited to her account and can be used for her business purposes.Rate this question:
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- 3.
Daniel is going on vacation and does not wish to take cash. Which type of negotiable instrument should he take with him?
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Cashier's check
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Large cash bills
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Money order
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Traveler's checks
Correct Answer
A. Traveler's checksExplanation
Traveler's checks would be the best option for Daniel to take with him on vacation as he does not wish to carry cash. Traveler's checks are a type of negotiable instrument that can be used as a form of payment and can be easily replaced if lost or stolen. They provide a safe and convenient way to make purchases and access funds while traveling, as they can be used like cash but can be replaced if lost or stolen.Rate this question:
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- 4.
Lorin is very careful when writing checks. Which check writing procedure does she use to avoid negligence when writing a check?
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Changing the figures and written amount
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Not signing check
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Writing close to "Pay to the Order of"
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Writing figures only
Correct Answer
A. Writing close to "Pay to the Order of"Explanation
Lorin uses the check writing procedure of writing close to "Pay to the Order of" to avoid negligence when writing a check. By writing close to this line, she ensures that there is no space for someone to add additional names or alter the payee information. This helps to prevent any fraudulent activity or unauthorized changes to the check.Rate this question:
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- 5.
Belinda has opened a checking account and wants to avoid writing a bad check. What should she do to avoid writing a bad check? What should she do immediately?
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Ask the bank to issue a stop payment
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Check for outstanding deposits
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Make a deposit and then write the check
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Verify the account balance will cover check
Correct Answer
A. Verify the account balance will cover checkExplanation
Belinda should immediately verify that her account balance will cover the check she wants to write. This means she should check how much money she has in her account before writing the check to ensure that she has enough funds available. By doing so, she can avoid the risk of writing a bad check, which could result in fees, penalties, and damage to her financial reputation.Rate this question:
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- 6.
Shawn wrote a promissory note to Larry. What term identifies Shawn in this transaction?
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Acceptor
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Drawee
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Drawer
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Maker
Correct Answer
A. MakerExplanation
In this transaction, Shawn is identified as the "Maker." The maker of a promissory note is the person who promises to pay a certain amount of money to the payee (in this case, Larry) at a specified time in the future. The maker is responsible for making the payment according to the terms of the promissory note.Rate this question:
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- 7.
Craig returned a recently purchased stereo to Electronic Warehouse for a full refund. Last week Craig's credit card bill still showed a charge for the purchase. What law could help Craig correct this error?
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Disputed Charges Reform Act
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Fair Credit Billing Act
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Fair Credit Reporting Act
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Federal Trade Commission Act
Correct Answer
A. Fair Credit Billing ActExplanation
The Fair Credit Billing Act could help Craig correct the error of his credit card bill still showing a charge for the returned stereo. This act provides protections for consumers in cases of billing errors and unauthorized charges. It allows consumers to dispute and correct billing errors with their credit card issuer, ensuring that they are not held responsible for charges they did not make or for products they returned.Rate this question:
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- 8.
Bob cashed a check at a local store. What term identifies the store in this transaction?
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Acceptor
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Maker
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Payee
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Principal
Correct Answer
A. AcceptorExplanation
The term "acceptor" identifies the store in this transaction because the acceptor is the party who accepts a check and agrees to cash it. In this case, the store is accepting the check and providing the cash to Bob. The acceptor is responsible for verifying the authenticity of the check and ensuring that there are sufficient funds to cover it.Rate this question:
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- 9.
If Terri forgets to deposit a check to her account, what term would be used to describe this check after six months?
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Insufficient check
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Outstanding check
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Postdated check
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Stale check
Correct Answer
A. Stale checkExplanation
A stale check refers to a check that has not been deposited into an account after a certain period, usually six months. In this scenario, if Terri forgets to deposit the check to her account for six months, it would be considered a stale check.Rate this question:
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- 10.
Which endorsement should Terri make on checks that she deposits into her own account?
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Blank
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Restrictive
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Special/Full
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Transfer
Correct Answer
A. RestrictiveExplanation
Terri should make a restrictive endorsement on checks that she deposits into her own account. A restrictive endorsement includes the phrase "For deposit only" along with her account number. This type of endorsement restricts the use of the check to only be deposited into Terri's account, preventing anyone else from cashing or depositing it. It provides an extra level of security for Terri's funds and helps to ensure that the check is only used for its intended purpose.Rate this question:
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- 11.
Terri uses her $450 paycheck to pay her rent. Which endorsement should Terri make on the check she used to pay her rent?
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Blank
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Restrictive
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Special/Full
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Transfer
Correct Answer
A. Special/FullExplanation
Terri should make a Special/Full endorsement on the check she used to pay her rent. This type of endorsement allows the payee to specify how the funds should be used and ensures that the check can only be deposited into the specified account. By making a Special/Full endorsement, Terri ensures that the check can only be used for paying her rent and cannot be transferred or cashed by anyone else.Rate this question:
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- 12.
Terri cashed her paycheck. Which endorsement should Terri make on the check she cashed?
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Blank
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Restrictive
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Special/Full
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Transfer
Correct Answer
A. BlankExplanation
Terri should make a "Blank" endorsement on the check she cashed. This means she should simply sign her name on the back of the check without adding any additional instructions or restrictions. By doing this, Terri authorizes the bank to process the check and give her the cash value.Rate this question:
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- 13.
Stephen uses his home as security for a loan. Which term describes the use of his home in this transaction?
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Collateral
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Credit
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Interest
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Surety
Correct Answer
A. CollateralExplanation
In this transaction, Stephen is using his home as collateral for a loan. Collateral refers to an asset that is pledged as security for a loan. If Stephen fails to repay the loan, the lender can seize his home and sell it to recover the amount owed. Therefore, the term "collateral" accurately describes the use of his home in this transaction.Rate this question:
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- 14.
Mark's credit report indicates non-payment of a credit card bill. Mark wants to correct this error. Which act was passed by Congress to assist Mark in correcting this dispute?
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Disputed Charges Reform
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Fair Credit Billing
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Fair Credit Reporting
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Fair Debt Collection Practices
Correct Answer
A. Fair Credit BillingExplanation
The Fair Credit Billing act was passed by Congress to assist individuals like Mark in correcting disputes on their credit reports. This act provides consumers with the right to dispute and correct billing errors on their credit card statements. It outlines the procedures that credit card companies must follow when a consumer disputes a charge and requires them to investigate and resolve the dispute within a specific timeframe. This act aims to protect consumers from being held responsible for incorrect charges and ensures that their credit reports accurately reflect their payment history.Rate this question:
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- 15.
Theresa's credit card company adds finance charges to last month's ending balance. Which type of finance charge method is being used?
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Adjusted Balance Method
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Annual Percentage Rate Method
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Average Daily Balance Method
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Previous Balance Method
Correct Answer
A. Previous Balance MethodExplanation
The previous balance method is being used by Theresa's credit card company. This method calculates finance charges based on the balance at the end of the previous billing cycle. It does not take into account any payments or purchases made during the current billing cycle. Therefore, the finance charges are added to the previous month's ending balance to determine the total amount owed.Rate this question:
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- 16.
Joan is concerned she will be turned down for a loan because she is a single female. What law protects her against this concern?
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Equal Credit Opportunity Act
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Fair Credit Billing Act
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Fair Credit Reporting Act
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Fair Debt Collections Act
Correct Answer
A. Equal Credit Opportunity ActExplanation
The Equal Credit Opportunity Act protects Joan against being turned down for a loan based on her gender or marital status. This law prohibits creditors from discriminating against applicants on the basis of race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. Therefore, Joan can rely on this law to ensure that she is not denied credit solely because she is a single female.Rate this question:
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- 17.
Daniel buys goods on credit or borrows money. Which term identifies Daniel?
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Creditor
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Debtor
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Loanee
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Secured Party
Correct Answer
A. DebtorExplanation
The term "Debtor" identifies Daniel because he is the one who buys goods on credit or borrows money. A debtor is someone who owes money or is obligated to pay a debt to another party. In this case, Daniel is the one who has taken on the debt by purchasing goods on credit or borrowing money, making him the debtor.Rate this question:
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- 18.
Susie loses her credit card. Unauthorized charges are made on the card before notifying the issuing company. How much is Susie liable for?
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$100
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$25
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$50
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$75
Correct Answer
A. $50Explanation
When Susie loses her credit card and unauthorized charges are made before notifying the issuing company, she is liable for $50. This means that she is responsible for paying $50 of the unauthorized charges made on her card.Rate this question:
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- 19.
Vince is being threatened by his credit card company after falling behind in his payments. What law protects him against this concern?
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Equal Credit Opportunity Act
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Fair Credit Billing Act
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Fair Credit Reporting Act
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Fair Debt Collections Act
Correct Answer
A. Fair Debt Collections ActExplanation
The Fair Debt Collections Act protects Vince against the threats made by his credit card company. This law regulates the actions of debt collectors and prohibits them from engaging in abusive, unfair, or deceptive practices when attempting to collect debts. It provides consumers like Vince with certain rights, such as the right to dispute a debt and the right to be treated respectfully and fairly. Therefore, Vince can rely on the Fair Debt Collections Act to address his concerns and ensure that he is not subjected to harassment or unfair treatment by the credit card company.Rate this question:
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- 20.
Bart has no chance of getting out of debt and needs to liquidate all his belongings to pay creditors. Bart should file for which type of bankruptcy?
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Chapter 7
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Chapter 11
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Chapter 12
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Chapter 13
Correct Answer
A. Chapter 7Explanation
Bart's situation indicates that he is unable to repay his debts and needs to sell off his assets to pay creditors. Chapter 7 bankruptcy is the most appropriate option for him as it involves the liquidation of assets to discharge debts. Chapter 11 is typically used for businesses seeking reorganization, while Chapter 12 is specifically for family farmers or fishermen. Chapter 13 involves a repayment plan, which does not align with Bart's circumstances. Therefore, Chapter 7 is the best choice for him.Rate this question:
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- 21.
Mike has not made a payment on his car in over 6 months. What will the bank do with his car?
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Draft it
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Foreclose on it
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Repossess it
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Sell it
Correct Answer
A. Repossess itExplanation
The bank will repossess Mike's car because he has not made a payment in over 6 months. Repossession is a legal action taken by the bank to take back the car due to non-payment. Once the bank repossesses the car, they may choose to sell it in order to recover the outstanding loan amount.Rate this question:
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- 22.
James pledges a security for a car loan. What is the term used for the pledge?
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Collateral
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Credit
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Interest
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Surety
Correct Answer
A. CollateralExplanation
When James pledges a security for a car loan, the term used for this pledge is collateral. Collateral refers to an asset or property that a borrower offers as a guarantee to the lender in case they are unable to repay the loan. In this case, James is offering something of value, such as the car itself, as collateral to secure the loan. If James fails to repay the loan, the lender can seize the collateral to recover their losses.Rate this question:
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- 23.
Jan's landlord threatens to report unsubstantiated debts on her credit. What law protects her against this concern?
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Equal Credit Opportunity Act
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Fair Credit Billing Act
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Fair Credit Reporting Act
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Fair Debt Collections Act
Correct Answer
A. Fair Credit Reporting ActExplanation
The Fair Credit Reporting Act protects Jan against her landlord's threat to report unsubstantiated debts on her credit. This act regulates the collection, dissemination, and use of consumer credit information, ensuring fairness, accuracy, and privacy in credit reporting. It gives consumers the right to dispute inaccurate information and requires credit reporting agencies to investigate and correct any errors. Therefore, Jan can rely on this law to prevent her landlord from damaging her credit with false or unverified debts.Rate this question:
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- 24.
What is the purpose of bankruptcy laws?
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Give creditors an opportunity to recover from overwhelming debt
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Give debtors an opportunity to recover from overwhelming debt
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Pay selected creditors only
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Pay only selected debtors
Correct Answer
A. Give debtors an opportunity to recover from overwhelming debtExplanation
The purpose of bankruptcy laws is to give debtors an opportunity to recover from overwhelming debt. Bankruptcy laws provide a legal framework for individuals or businesses who are unable to repay their debts to seek relief and start afresh. It allows debtors to eliminate or restructure their debts, protect their assets from being seized, and establish a plan to repay their creditors over time. By providing this opportunity, bankruptcy laws aim to give debtors a chance to regain financial stability and rebuild their lives.Rate this question:
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Current Version
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Jul 29, 2024Quiz Edited by
ProProfs Editorial Team -
Apr 29, 2010Quiz Created by
Julie Priode
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