The Federal bankruptcy act contains several important terms.

The Federal bankruptcy act contains several important terms. One such term is "insider". The term is used in connection with preferences and preferential transfers. Which amoung the following in not an "insider".

Answer: A secured creditor having a security interest in at least 25% or more of the debtor's property.

Explanation: A secured creditor is not an "insider" for the purposes of a preferential transfer.
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One of the elements necessary to establish that a preferential transfer has been made under the Bankruptcy Code by the debtor to a creditor is that the..

One of the elements necessary to establish that a preferential transfer has been made under the Bankruptcy Code by the debtor to a creditor is that the..

Answer: Debtor was insolvent at the time of the transfer.

 Explanation: Under the Bankruptcy Act, one of the elements which must be established in proving that a preferential transfer was made is that the debtor was insolvent at the time of the transfer. The Bankruptcy Act presumes that the debtor is insolvent during 90 days prior to the date the petition was filed.

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The trustee in bankruptcy of a landlord-debtor under a Chapter 7 liquidation

The trustee in bankruptcy of a landlord-debtor under a Chapter 7 liquidation..

Answer: May assign the leases of the debtor

Explanation: the trustee may assign the leases of the landlord-debtor if such action is considered to be in the best interest of the debtor's estate. The trustee's duty is to acquires as many assets as possible for distribution to the creditors who files claims in the bankruptcy proceeding.

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Which of the following is an example of an endorsement found on the back of a promissory note that is a special qualified endorsement?

Which of the following is an example of an endorsement found on the back of a promissory note that is a special qualified endorsement?

Answer: Pay to Jenny Eaton without recourse, (signed) Jan Brake.

Explanation: The endorsement is special because it indicates the person, Jenny Eaton, to whom the instrument is negotiated. The endorsement is also qualified using the phrase "without recourse".

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Valuation of Bonds

Bonds generally provide for periodic fixed interest payments at a contract rate of interest. At issuance, or thereafter, the market rate of interest for the particular type of bond may be above, the same, or below the contract rate. If the market rate exceeds the contract rate, the book value will be less than the maturity value.  The difference (discount) will make up for the contract rate being below the market rate.
Conversely, when the contract rate exceeds the market rate, the bond will sell for more than maturity value to bring the effective rate to the market rate.  This difference (premium) will make up for the contract rate being above the market rate.  When the contract rate equals the market rate, the bond will sell for the maturity value.

The market value of a bond is equal to the maturity value and interest payments discounted to the present.  Finally, when solving bond problems, candidates must be careful when determining the number of months to use in the calculation of interest and discount/premium amortization.  For example, candidates frequently look at a bond issue with an interest date of September 1 and count 3 months to December 31. This error is easy to make because candidates focus only on the fact that September is the ninth month instead of also noting whether the date is at the beginning or end of the month.

The issue price of bonds is equal to the present value (PV) of the maturity value plus the PV of the interest annuity.  The PV must be computed using the yield rate.  The computation is

Amount   PV Factor   PV
$1,000,000 × .386 = $386,000
80,000 × 6.145 = 491,600
Total issue price       $877,600

The interest amount above ($80,000) is the principal ($1,000,000) times the stated rate (8%).

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A client wants to know how many years it would take before..

the accumulated cash flows from an investment exceed the initial investment, without taking the time value  of money into account. Which of the following financial models should be used?

• Net present value
• Time value of money
• Payback period
• Internal rate of return

Answer: Payback Period

The requirement is to identify the term that describes a method that measures the number of years it takes to recoup an initial investment without considering the time value of money. This answer is correct because the definition describes the payback period.

What is process reengineering?

Process Reengineering is a critical evaluation and major resign of existing processes to achieve breakthrough improvements in performance.

An overall description of a database

...Including the names of data elements, their characteristics, and their relationship to one another, would be defined by using a:

Answer: Data Definition Language (DDL) 

Used to define a database, including creating, altering, and deleting tables and establishing various constraints.

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