Question 1

The party to whom a check is written is the payee of the check.

Accepted Answer

A) True 
 B)False

Question 2

A certificate of deposit is not an order to pay.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is true of a negotiable instrument?

Accepted Answer

A)  It should be signed by the payee. 
B)  It can be either written or oral. 
C)  It should not require any undertaking other than the payment of money. 
D)  It need not state a fixed amount of money and can include a service that needs to be rendered. 
A)  It should be signed by the payee. 
B)  It can be either written or oral. 
C)  It should not require any undertaking other than the payment of money. 
D)  It need not state a fixed amount of money and can include a service that needs to be rendered.

Question 4

A(n)________ is necessary for a bearer paper to be negotiable.

Accepted Answer

A)  acceleration clause 
B)  indorsement 
C)  delivery 
D)  specific payee or indorsee 
A)  acceleration clause 
B)  indorsement 
C)  delivery 
D)  specific payee or indorsee

Question 5

A(n)________ is an instrument that is payable to a specific payee or indorsed to a specific indorsee.

Accepted Answer

A)  bearer bond 
B)  bearer paper 
C)  allonge 
D)  order paper 
A)  bearer bond 
B)  bearer paper 
C)  allonge 
D)  order paper

Question 6

Which of the following is true of a special indorsement?

Accepted Answer

A)  It is only considered valid if it includes words of negotiation. 
B)  It requires the signature of an indorser to be valid. 
C)  It can be negotiated by delivery. 
D)  It is considered a bearer instrument. 
A)  It is only considered valid if it includes words of negotiation. 
B)  It requires the signature of an indorser to be valid. 
C)  It can be negotiated by delivery. 
D)  It is considered a bearer instrument.

Question 7

Discuss the methods of transferring checks.

Accepted Answer

In order to transfer a check,it is neces

Question 8

Martha is about to indorse an instrument for transfer.However,she finds that there is not enough room on the instrument for her to indorse.In this situation,Martha should use a(n)________ for the indorsement.

Accepted Answer

A)  addendum 
B)  exhibit 
C)  allonge 
D)  codicil 
A)  addendum 
B)  exhibit 
C)  allonge 
D)  codicil

Question 9

Which of the following is true of a bearer paper?

Accepted Answer

A)  It is payable to a specific person who is named in the instrument. 
B)  It is payable to the person in possession of the instrument. 
C)  It is a promise to pay a specific sum of money to a specific payee. 
D)  It is promise to pay an additional undertaking other than money. 
A)  It is payable to a specific person who is named in the instrument. 
B)  It is payable to the person in possession of the instrument. 
C)  It is a promise to pay a specific sum of money to a specific payee. 
D)  It is promise to pay an additional undertaking other than money.

Question 10

A(n)________ is negotiated by delivery,with the necessary indorsement.

Accepted Answer

A)  bearer paper 
B)  order paper 
C)  promissory note 
D)  check 
A)  bearer paper 
B)  order paper 
C)  promissory note 
D)  check

Question 11

Which of the following is a distinct characteristic of a check?

Accepted Answer

A)  It always draws its money from a financial institute. 
B)  It is created when credit is extended to a buyer by a seller. 
C)  It is a two-party instrument. 
D)  It is an unconditional written promise to pay. 
A)  It always draws its money from a financial institute. 
B)  It is created when credit is extended to a buyer by a seller. 
C)  It is a two-party instrument. 
D)  It is an unconditional written promise to pay.

Question 12

The ________ requirement of negotiable instruments says that negotiable instruments must be able to be easily transported between areas.

Accepted Answer

A)  portability 
B)  permanency 
C)  signature 
D)  transparency 
A)  portability 
B)  permanency 
C)  signature 
D)  transparency

Question 13

Roger,a certified lawyer,borrows money from Jax to start a business.He executes a promissory note stating that he will repay the money within the next five years if he inherits any money from his parents.Which of the following is true of the negotiability of the promissory note executed by Roger?

Accepted Answer

A)  It is negotiable for the next five years. 
B)  It is invalid. 
C)  It is a nonnegotiable instrument. 
D)  It is a negotiable instrument if Jax accepts it. 
A)  It is negotiable for the next five years. 
B)  It is invalid. 
C)  It is a nonnegotiable instrument. 
D)  It is a negotiable instrument if Jax accepts it.

Question 14

A promissory note is evidence of the borrower's promise to repay the debt.

Accepted Answer

A) True 
 B)False

Question 15

Who is the drawee of a check?

Accepted Answer

A)  The drawer of the check is also its drawee. 
B)  The financial institution where the drawer has an account. 
C)  The party to whom a check is written and who has a checking account with the same financial institution as the drawer. 
D)  The party who signs the check. 
A)  The drawer of the check is also its drawee. 
B)  The financial institution where the drawer has an account. 
C)  The party to whom a check is written and who has a checking account with the same financial institution as the drawer. 
D)  The party who signs the check.

Question 16

A ________ is an example of a promise to pay.

Accepted Answer

A)  lease 
B)  certificate of deposit 
C)  draft 
D)  check 
A)  lease 
B)  certificate of deposit 
C)  draft 
D)  check

Question 17

A check is drawn on a financial institution and is payable on demand.

Accepted Answer

A) True 
 B)False

Question 18

The permanency requirement of negotiable instruments says that they must be written or printed on ordinary paper.

Accepted Answer

A) True 
 B)False

Question 19

One of the fundamental requirements for a negotiable instrument is that it must be ________.

Accepted Answer

A)  supplemented with interest upon payment 
B)  secured with collateral 
C)  a three-party instrument 
D)  written on an ordinary paper 
A)  supplemented with interest upon payment 
B)  secured with collateral 
C)  a three-party instrument 
D)  written on an ordinary paper

Question 20

A ________ is a three-party instrument that is an unconditional written order by one party that orders a second party to pay money to a third party.

Accepted Answer

A)  draft 
B)  promissory note 
C)  certificate of deposit 
D)  lease 
A)  draft 
B)  promissory note 
C)  certificate of deposit 
D)  lease

Exam 20: Creation and Transfer of Negotiable Instruments

The party to whom a check is written is the payee of the check.

A certificate of deposit is not an order to pay.

Which of the following statements is true of a negotiable instrument?

A(n)________ is necessary for a bearer paper to be negotiable.

A(n)________ is an instrument that is payable to a specific payee or indorsed to a specific indorsee.

Which of the following is true of a special indorsement?

Discuss the methods of transferring checks.

Martha is about to indorse an instrument for transfer.However,she finds that there is not enough room on the instrument for her to indorse.In this situation,Martha should use a(n)________ for the indorsement.

Which of the following is true of a bearer paper?

A(n)________ is negotiated by delivery,with the necessary indorsement.

Which of the following is a distinct characteristic of a check?

The ________ requirement of negotiable instruments says that negotiable instruments must be able to be easily transported between areas.

Roger,a certified lawyer,borrows money from Jax to start a business.He executes a promissory note stating that he will repay the money within the next five years if he inherits any money from his parents.Which of the following is true of the negotiability of the promissory note executed by Roger?

A promissory note is evidence of the borrower's promise to repay the debt.

Who is the drawee of a check?

A ________ is an example of a promise to pay.

A check is drawn on a financial institution and is payable on demand.

The permanency requirement of negotiable instruments says that they must be written or printed on ordinary paper.

One of the fundamental requirements for a negotiable instrument is that it must be ________.

A ________ is a three-party instrument that is an unconditional written order by one party that orders a second party to pay money to a third party.

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