Use This Fact Situation to Answer the Related Questions That

question 32

Multiple Choice

Use this fact situation to answer the related questions that follow. Henry Jones is the sole shareholder of Happy Go Lucky Company (HGLC) .Henry,needing a loan from his bank,went to his accountant,Bob Wallice,and asked him to prepare a financial statement of the company that Henry could give to the bank to get the loan.Unfortunately,Mr.Wallice included certain property that did not belong to the company,which increased its value.When Henry took the financial statement to the bank,the bank caught the error,but made Henry guarantee the loan.The bank then told Mr.Wallice,who forgot to correct the error in the financial statement.A few days later,Henry decided he needed to invest more money in his company and began negotiations with a business associate,Carol Hill.When Carol asked for the financial statement of the company,Henry told her she could get it from the bank or from his accountant.Carol decided to go to the bank,which gave her the financial statement with the error in it.Based on the financial statement,Carol invested $50 000.00 in the company,only to realize a month later the problem with the financial statement the bank had given to her.
In this situation,

• A)Mr.Wallace owed a fiduciary duty to Carol.
• B)the bank owed a fiduciary duty to Carol.
• C)Mr.Wallace owed a fiduciary duty to Harry.
• D)Mr.Wallace owed a fiduciary duty to the bank.
• E)all of the above

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Definitions:

Compounded Monthly

Interest calculated on the initial principal and the accumulated interest every month.

Beginning-of-month Withdrawals

Refers to funds being taken out of an account at the start of each month, often in the context of automated payment plans or investments.

Nominal Rate

The stated or advertised interest rate on a loan or investment, not accounting for compounding or fees.

Effective Rate

The interest rate on a loan or financial product, adjusted for the effect of compounding over a specified period of time.