Week 14 Quiz

An illustrative ride-share driver compares an 18-dollar fare for a 9-mile trip with a 12-dollar fare for a 4-mile trip and finds that the shorter trip paid more per mile. Which of money's jobs makes that comparison possible?

Select one.

• Medium of exchange
• Unit of account
• Store of value
• Reserve requirement

Which federal law created the Securities and Exchange Commission (SEC)?

Select one.

• The Securities Act of 1933
• The Securities Exchange Act of 1934
• The Sarbanes-Oxley Act of 2002
• The Federal Reserve Act of 1913

True or false: the 8 percent rate on the illustrative coffee cart's loan offer for a second cart is a rate the Federal Reserve set.

True or false.

• True
• False

Which statement words FDIC deposit insurance the way the FDIC does?

Select one.

• It covers 250,000 dollars per depositor, per insured bank, for each account ownership category.
• It covers 250,000 dollars per account, so each new account adds another 250,000 dollars.
• It covers stocks, bonds, and mutual funds bought at an insured bank, up to 250,000 dollars.
• It covers 250,000 dollars per insured bank, shared among all of that bank's depositors.

An illustrative depositor holds 300,000 dollars in one account ownership category at one insured bank. How much of that money is above the FDIC's standard maximum for that category at that bank?

Select one.

• 250,000 dollars
• 300,000 dollars
• 25,000 dollars
• 50,000 dollars

The illustrative coffee cart can borrow 20,000 dollars at 8 percent a year to buy a second cart. How much interest does the loan cost each year?

Select one.

• 1,000 dollars
• 2,000 dollars
• 1,600 dollars
• 160 dollars

The illustrative coffee cart ends its first year with total liabilities of 12,000 dollars and owner's equity of 16,000 dollars. If it borrows 20,000 dollars for a second cart, what is its debt-to-equity (total liabilities ÷ owners' equity) after the loan?

Select one.

• 2.0
• 0.75
• 1.25
• 0.5

An illustrative bike-shop chain organized as a corporation has both stockholders and bondholders. Its board of directors decides to keep all of this year's profit to open new stores. Which statement is true?

Select one.

• The stockholders must still be paid a dividend, because they own the chain.
• The bondholders lose this year's interest, because there is no dividend.
• The board has broken a promise to the stockholders by skipping the dividend.
• The stockholders get no dividend, but the bondholders are still owed interest.

In the illustrative coffee cart's start-up funding plan, the owner put in 20,000 dollars of the owner's own money and took a 10,000-dollar equipment loan. Which kinds of financing are those two sources?

Select one.

• Both are debt financing, because both must be paid back.
• The owner's money is debt and the loan is equity.
• The owner's money is equity and the loan is debt.
• Both are equity financing, because the owner controls both.

Why can a corporation raise equity by selling stock in a way a sole proprietorship cannot?

Select one.

• A sole proprietorship is not allowed to borrow money from a bank.
• A corporation's stockholders are creditors whose money must be repaid.
• A corporation never pays interest on any money it raises.
• A corporation can sell shares of ownership; a sole proprietorship has one owner.