ALLIED BUS230 MODULE 8 check your understanding

Question Points
1. If a
promissory note is not presented for payment on the due date, it is discharged.
a. True
b. False
2. Which of
the following statements best describes the effect of a person indorsing a
check “without recourse?”
a. The person
coverts the check to bearer paper.
b. Directs payment
to a specific person.
c. The person makes
no promise or guarantee of payment on dishonor of the instrument.
d. The person has no
liability to prior indorsers.
3. A draft
made out in the United States calls for payment in German marks.
a. The draft is
nonnegotiable since it must be paid in German marks.
b. The draft is
nonnegotiable because the rate of exchange fluctuates and it will interfere
with the requirement that the instrument be payable in a fixed sum of money.
c. The draft is
negotiable if it satisfies all the requirements of negotiability under Article
3 of the UCC.
d. The instrument is
negotiable only if the exchange rate is written on the draft.
4. Which of
the following requirements must be met for a transferee of order paper to
become a holder:
a. possession only.
b. indorsement and
transfer only
c. possession and indorsement
of transferor
d. all of the
choices apply.
5. Reynolds
sent Winston a check for $1,000 as payment on a debt. The check was dated March
1, but Winston did not present the check to Wider National Bank, the drawee,
until October 8 the same year. If Wider National Bank refuses to pay the check,
claiming it is stale, then it becomes liable to:
a. reynolds.
b. winston.
c. both Reynolds and
Winston.
d. none of the
choices apply.
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6. Marsh,
without fraudulent intent, wrote a check for $500 on her checking account at
Mechanics Mutual Bank, where only $350 was on deposit. Marsh has no agreement
with the bank regarding overdrafts. In this case the bank:
a. must pay $350.
b. must pay $500.
c. may honor the
check and charge Marsh’s account for no more than $350.
d. may honor the
check and charge Marsh’s account for $500.
7. A written
order by one person directing the person’s bank to pay a certain sum of money
to another person is a:
a. promissory note.
b. certificate of
deposit.
c. draft.
d. check.
8. A written
stop-payment order is effective for:
a. ten days.
b. fourteen days.
c. six months.
d. one year.
9. Franklin
wrote a check on the Second National Bank payable to Garth. When Garth
presented the check for payment, Second National refused to cash it, although
the check was in proper form and Franklin had sufficient funds on deposit at
the bank. The Second National Bank is liable to:
a. franklin and
Garth.
b. franklin only.
c. garth only.
d. none of the
choices apply.
LO1E:Recognize the rights and duties of parties to a
negotiable instrument.
0.5
10. If the
drawee of a draft refuses to pay the instrument, it is dishonored.
a. True
b. False
11. Endorsers
are generally liable in the order in which they endorse the instrument.
a. True
b. False
12. The first
transfer of a negotiable instrument to the payee (a holder) by the maker or
drawer is called an issue.
a. True
b. False
Hint: p. 327
13. Nonnegotiable
instruments are subject to the rules of ordinary contracts and can be
transferred by assignment.
a. True
b. False
Hint: p. 342
14. A
negotiable instrument may be negotiated by:
a. indorsement and
delivery.
b. delivery alone.
c. either
indorsement and delivery or delivery alone.
d. none of the
choices apply.
15. A blank
indorsement:
a. consists only of
the signature of the indorser.
b. makes the
instrument payable to the bearer.
c. allows an
instrument to be transferred by delivery alone.
d. all of the
choices apply.
16. An
instrument is payable or at a definite time if it is payable:
a. upon someone’s
death.
b. when a certain
event occurs.
c. thirty days after a certain date.
d. to a bank.
17. When two
or more checks are presented to a bank for payment at the same time, and the
depositor’s account is insufficient to pay them all, the bank may:
a. declare all the
checks automatically void.
b. pay the checks in
any order until the funds in the depositor’s account run out.
c. declare all the
checks stale checks.
d. all of the
choices apply.
18. If the
payee or a holder has a check certified, the drawer is released from all
liability for payment.
a. True
b. False
19. A check
that is more than six months old is called a:
a. stale check.
b. postdated check.
c. certified check.
d. bad check.
20. When a
customer presents a merchant with a debit card to purchase goods, the
transaction is called a(n):
a. EFTS transfer.
b. ATM transaction.
c. VISA transaction.
d. POS transaction.