Chapters 23 & 24 Examination 

MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question.

1)  A nonprofit corporation is:

A) any corporation that has never made a profit.

B) a corporation formed for charitable, educational, religious, or scientific purposes that cannot make a profit.

C) a corporation formed for charitable, educational, religious, or scientific purposes that can make a profit, although any profit may not be distributed to its members, officers, or directors.

D) any corporation that does not intend to make a profit.

2)  A promoter enters into a contract on behalf of a proposed corporation.  The corporation has not yet come into existence.  Which of the following statements best describes the promoter's liability on this contract?

A) If the corporation never comes into existence, the promoter will be liable on this contract.

B) Even if the corporation is never formed, the promoter is not liable on this contract.

C) If a novation occurs, the promoter is released from this contract.

D) Once the corporation comes into existence, the promoter is automatically released from this contract.

E) both A and C

3)  Which of the following is not true about promoters of a corporation?

A) A promoter can be relieved of liability on a contract entered into on behalf of a corporation with a third party if, after the corporation is formed, the third party agrees to a novation.

B) If the corporation fails to come into existence, the promoter cannot be held liable on contract entered into on behalf of the corporation.

C) The creation of the corporation does not automatically release the promoter from contracts entered into on behalf of the corporation.

D) A promoter can be relieved of liability on a contract entered into on behalf of a corporation with a third party if, at the time the contract is entered into, the third party agrees to a novation to occur automatically upon the valid creation of the corporation.

4)  Generally, in order to adopt an amendment to the articles of incorporation of an existing corporation, what must be done?

A) The promoters must file the amendment in the state of incorporation.

B) The board of directors must vote on the amendment as provided in the bylaws.

C) The shareholders must vote in favor of the amendment.

D) The board of directors must adopt a resolution approving the amendment.

E) The board of directors must adopt a resolution recommending the amendment and the shareholders must vote to approve the amendment.

5)  Which of the following best describes a stock option?

A) It gives the holder the right to receive shares of stock, without having to pay any additional amount, if the market price of the stock reaches the option price.

B) It gives the holder the right, for a fixed period of time, to buy shares of stock for a fixed price so long as the market price of the stock does not exceed the option price.

C) It gives the holder the right, for a fixed period of time, to buy shares of stock at the option price even if the market price of the stock rises above the option price.

D) It gives the holder the right to sell stock at the option price.

TRUE/FALSE.  Write 'T' if the statement is true and 'F' if the statement is false.

6)  With disability insurance, the payments are generally made to the insured even though the insured does not document actual expenses.

MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question.

7)  When must an insurable interest exist for life insurance and property insurance, respectively?

A) at the time of loss, and at the time of policy issuance

B) at the time of policy issuance for both life insurance and property insurance

C) at the time of policy issuance, and at the time of payment of the premium

D) at the time of loss for both life insurance and property insurance

E) at the time of policy issuance, and at the time of loss

8)  Which of the following is not one of the parties to a standard life insurance contract?

A) insured

B) insurance broker

C) owner

D) insurance company

E) beneficiary

9)  The basic difference between whole life insurance and universal life insurance is that:

A) universal life is a single premium payment plan and whole life is not.

B) universal life is usually purchased by corporations on its employees and whole life is usually purchased by individuals for family members.

C) the universal life investment portion pays interest at a variable rate and whole life does not.

D) there is no difference because they are two terms for the same type of policy.

E) universal life includes health insurance and whole life does not.

10)  Under an automobile insurance policy, what does comprehensive coverage protect against?

A) all types of losses caused by the insured to other parties

B) all types of loss in connection with the ownership and operation of a vehicle

C) all types of damage to the covered vehicles of the insured

D) all types of damage to the covered vehicles of the insured except for damage caused by collision

E) coverage for all losses in connection with the vehicle of the insured that are caused by other parties

TRUE/FALSE.  Write 'T' if the statement is true and 'F' if the statement is false.

11)  In a per stirpes distribution, a person in a higher generation receives twice the share of one in the next lower generation.

MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question.

12)  Which of the following is true about witnesses who attest to a will?

A) They need not be family members, but must have known the testator a reasonable length of time.

B) These witnesses must be close family members.

C) The witnesses cannot be witnesses for wills of more than one person within the same family.

D) The witnesses must witness the writing of the will and the testator's signing of the will.

E) If they are beneficiaries under the will, most states either ignore the dispositions to them or invalidate the entire will.

13)  Which of the following best describes the doctrine of ademption?

A) When there are not enough assets to satisfy all the gifts in the will, the residual gifts will be the last to be paid.

B) When assets are distributed to lineal descendants, equal shares are given to all descendants regardless of which generation they are in.

C) When there are not enough assets in the estate to satisfy all general gifts, they are all satisfied on a pro rata basis.

D) If a decedent dies without owning the property that was the subject of a specific gift in the will, the beneficiary will receive nothing for it.

14)  Which of the following is not a characteristic of reciprocal wills?

A) They are separate wills where the testators leave property to each other.

B) They can be executed only by husband and wife.

C) The leaving of property to each other is conditioned on the beneficiary disposing further of the property only in accordance with the terms of the reciprocal wills.

D) They cannot be revoked after one of the parties dies.

15)  An inter vivos trust is what kind of trust?

A) any trust that first takes effect while the settlor is living

B) any trust where beneficiaries receive benefits only while living

C) any trust where the settlor determined the terms of the trust while the settlor was living

D) any trust that lasts beyond the death of the settlor

E) any trust in which all beneficiaries are already living when it is created

MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question.

1)  C

2)  E

3)  B

4)  E

5)  C

TRUE/FALSE.  Write 'T' if the statement is true and 'F' if the statement is false.

6)  TRUE

MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question.

7)  E

8)  B

9)  C

10)  D

TRUE/FALSE.  Write 'T' if the statement is true and 'F' if the statement is false.

11)  FALSE

MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question.

12)  E

13)  D

14)  B