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1) One of the common functions of negotiable instruments is as a substitute for money.
2) A check is a form of draft that is drawn on a bank.
3) A certificate of deposit is a form of note in which the bank is the maker.
4) An I.O.U. is another form of note that is considered to be a promise to pay.
5) In negotiable instruments, negotiation refers to the process of reaching agreement on the terms of a negotiable instrument.
6) Which of the following is not one of the four general types of negotiable instruments?
D) an assignable contract
E) certificates of deposit
7) Which of the following correctly describes a certificate of deposit?
A) It is a note where the maker is a bank.
B) It is not considered to be a negotiable instrument.
C) It is a money order where the maker is a bank.
D) It is a draft that is payable by a bank.
8) Monetary (having to do with money) negotiable instruments can be classified into which two general categories?
A) notes and certificates of deposit
B) checks and certificates of deposit
C) checks and notes
D) notes and drafts
9) Which of the following is not a requirement of negotiability?
A) The instrument must be signed by the maker or drawer.
B) The instrument must contain an endorsement.
C) The instrument must contain an unconditional order or promise to pay.
D) The instrument must be in writing.
E) Generally the instrument must state a fixed amount of money.
10) In order to meet the writing requirement of a negotiable instrument, the writing must:
A) be written in clear English.
B) be permanent and portable.
C) be typewritten rather than handwritten.
D) be prepared in duplicate.
11) An instrument that is payable to "Cash" is:
A) nonnegotiable because of ambiguity. B) bearer paper.
C) nonnegotiable because of a condition. D) order paper.
12) What is the effect of a promissory note containing a conditional promise?
A) The note is voidable.
B) The note is void.
C) The note is an enforceable contract even though it is nonnegotiable.
D) The note becomes negotiable once the condition is met.
E) The note is negotiable even though the promise is conditional.
13) The negotiation of an order instrument requires:
A) endorsement only.
B) delivery only.
C) endorsement and delivery.
D) None of the above.
14) What effect can endorsements have on the character of negotiable instruments?
A) Endorsements can convert bearer paper to order paper, but not vice versa.
B) Endorsements can convert order paper to bearer paper, and can convert bearer paper to order paper.
C) Endorsements can convert order paper to bearer paper, but not vice versa.
D) Endorsement cannot change either bearer or order paper to the other classification.
15) Which of the following is not a type of endorsement?
A) blank B) elective C) restrictive D) qualified
16) Which of the following is correct with regard to a holder in due course?
A) A holder in due course is the same as a simple holder.
B) A holder in due course must notify subsequent transferees of his holder in due course status.
C) A holder in due course is primarily liable on an instrument.
D) A holder in due course can obtain greater rights to payment of an instrument than the person who transferred the instrument to them.
17) A holder in due course takes an instrument free of which defenses?
A) real defenses only
B) free of no defenses
C) free of all defenses
D) personal defenses only
18) To qualify as a holder in due course what must a holder do?
A) Take the instrument for value.
B) Take the instrument in good faith.
C) Take the instrument without notice that it is overdue or defective.
D) A, B and C
E) B and C only
19) In order to become a holder in due course, one must take a negotiable instrument without notice of the following except:
A) that there is a defense against it.
B) that there was a claim to it by another person.
C) that the instrument was signed by an agent.
D) that the instrument has been dishonored.
E) that the instrument is overdue.
20) What type of relationship is created when a customer makes a deposit into her account at a bank?
21) What options does a payee have who is holding a check payable to her?
A) She must seek payment directly from the drawee bank.
B) She may seek payment from the drawee bank, seek payment by depositing the check in her account at her own bank or she may indorse the check to another person, and this endorsement does not need the approval of the drawer or drawee.
C) She must seek payment on the check, either directly from the drawee bank or by depositing the check in her account at her own bank.
D) She may seek payment form the drawee bank, seek payment by depositing the check in her account at her own bank or she may indorse the check to another person, so long as the endorsement has been approved by the drawer.
E) She may seek payment from the drawee bank, seek payment by depositing the check in her account at her own bank or she may indorse the check to another person, so long as the endorsement has been approved by the drawee.
22) Which of the following statements is not true regarding ATM Cards
A) Generally ATM transactions result in an immediate withdrawal from the customers account.
B) Congress and the Federal Reserve Board have enacted legislation to protect ATM users.
C) A customer has unlimited liability for the unauthorized use of a lost or stolen debit card.
D) None of the above.
23) When a check is certified, which of the following occurs?
A) The drawer agrees that the check will be paid.
B) The drawer becomes liable to pay the check if the bank does not honor it.
C) An endorser is certifying to an indorse that the check will be paid.
D) The drawee bank agrees in advance that it will accept a check when it is presented.
24) Which of the following is a characteristic of bank checks that makes payees often more willing to accept a bank check than to accept a personal check?
A) The payee is required to accept them as legal tender in most situations.
B) They cannot be indorsed to other parties.
C) The bank is solely or primarily responsible for payment.
D) They are usually written for large amounts.
25) Who certifies a check?
A) the drawer
B) the drawee bank
D) the payee
E) None of the above
26) The main reason that someone would use a cashier's check to make a payment rather than a check drawn on that person's own account is that:
A) Cashier's checks can be indorsed to third parties.
B) Using a cashier's check will cost less.
C) Payees are often more willing to accept a cashier's check.
D) The person will obtain a longer float time with the cashier's check.
27) Traveler's checks are not used as much as they were in the past because:
A) Issuers have become reluctant to issue them because of the losses due to lost traveler's checks.
B) The use of credit cards and ATM cards is replacing the use of traveler's checks.
C) The service fees have increased to the point that most travelers refuse to pay them.
D) The changes in the law regarding postdated checks have reduced their usefulness.
E) They are no longer recognized under the Uniform Commercial Code.
28) When the drawer of a check dies, the bank can pay:
A) checks drawn on the account for ten days following the date of death if permission to do so has been given by the heirs.
B) checks drawn on the account for ten days following the date of death in all cases.
C) checks drawn on the account for ten days following the date of death unless someone claiming an interest in the account orders the bank to stop payment.
D) checks drawn on the account for six months following the date of death.
29) Stop payment orders:
A) are effective as long as the account remains open if the order is in writing.
B) are effective for six months whether oral or in writing.
C) oral stop payment orders are effective for only 14 days. Written stop payment orders are effective for six months and can be renewed for an additional six months.
D) must always be in writing in order to be effective.
30) Banks are required to file a Currency Transaction Report with the Internal Revenue Service for:
A) any suspected criminal activity involving funds of any amount.
B) all transactions involving cash or checks in the amount of $10,000 or more.
C) all transactions involving only ordinary checks of $10,000 or more.
D) None of the above