Question 1

A ________ is a special form of contract that satisfies the requirements established by Revised Article 3 of the UCC.

Accepted Answer

A)  rental agreement 
B)  negotiable instrument 
C)  lease agreement 
D)  nonnegotiable contract 
A)  rental agreement 
B)  negotiable instrument 
C)  lease agreement 
D)  nonnegotiable contract

Question 2

A(n)________ allows a payee or holder to quicken payment of the principal amount of an instrument,plus accrued interest,upon the occurrence of an event.

Accepted Answer

A)  acceleration clause 
B)  prepayment clause 
C)  extension clause 
D)  forestallment clause 
A)  acceleration clause 
B)  prepayment clause 
C)  extension clause 
D)  forestallment clause

Question 3

Hannah has to repay $4,678 to Ray.She draws a promissory note to that effect.How does executing a promissory note help Hannah in this case? Explain the different parties involved in it.

Accepted Answer

Hannah executes a promissory note as evi

Question 4

Which of the following is true of a promissory note?

Accepted Answer

A)  It is an evidence of repayment of debt. 
B)  It is a note denying the credit. 
C)  It is an evidence of extension of credit. 
D)  It is a note of acknowledgement of debt. 
A)  It is an evidence of repayment of debt. 
B)  It is a note denying the credit. 
C)  It is an evidence of extension of credit. 
D)  It is a note of acknowledgement of debt.

Question 5

A promissory note is an order to pay.

Accepted Answer

A) True 
 B)False

Question 6

Harry orally promises to pay $7,543 that he owes to Rob.The next day,Rob wants the promise to be written on paper.In this scenario,Rob wants the ________ requirement to be fulfilled in order for the note to be binding.

Accepted Answer

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

Question 7

A promissory note is an unconditional written promise by one party to pay money to another party.

Accepted Answer

A) True 
 B)False

Question 8

A primary function of a negotiable instrument is that it acts as a substitute for ________.

Accepted Answer

A)  money 
B)  goods sold 
C)  services rendered 
D)  the assets held by the drawer 
A)  money 
B)  goods sold 
C)  services rendered 
D)  the assets held by the drawer

Question 9

Which of the following is a similarity between a bearer paper and an order paper?

Accepted Answer

A)  both require a specific payee to be named 
B)  both require indorsements to be considered negotiable 
C)  both require delivery to be considered negotiable 
D)  both can be claimed by whoever presents the instrument for payment 
A)  both require a specific payee to be named 
B)  both require indorsements to be considered negotiable 
C)  both require delivery to be considered negotiable 
D)  both can be claimed by whoever presents the instrument for payment

Question 10

Roger,a certified lawyer,borrows money from Jax to start a business.He executes a promissory note stating that he will pay the money back within the next five years.However,Roger also requests for a specific clause to be added that will allow faster repayment of the loan if he inherits any money within the five years.In this scenario,Roger is requesting for a(n)________ clause.

Accepted Answer

A)  prepayment 
B)  acceleration 
C)  extension 
D)  forestallment 
A)  prepayment 
B)  acceleration 
C)  extension 
D)  forestallment

Question 11

Bill executes a negotiable instrument that is drawn on Kay Bank,payable to Beth.Which negotiable instrument has Bill executed? Explain the different parties involved in the instrument.

Accepted Answer

Bill has drawn a check.A check is a dist

Question 12

A promissory note is a note denying a debt.

Accepted Answer

A) True 
 B)False

Question 13

What is certificate of deposit (CD)? Discuss the different types of CDs and the parties involved in a CD.

Accepted Answer

A certificate of deposit (CD)is a specia

Question 14

Karen has a checking account at First Bank.Karen writes a check to Bonanza Apartments for her rent.Which of the following is true of this situation?

Accepted Answer

A)  Karen is the drawer, First Bank is the drawee, and Bonanza is the payee. 
B)  Karen is the drawee, First Banks is the drawer, and Bonanza is the payee. 
C)  Karen is the payee, First Bank is the drawee, and Bonanza is the drawer. 
D)  Karen is the payee, First Bank is the drawer, and Bonanza is the drawee. 
A)  Karen is the drawer, First Bank is the drawee, and Bonanza is the payee. 
B)  Karen is the drawee, First Banks is the drawer, and Bonanza is the payee. 
C)  Karen is the payee, First Bank is the drawee, and Bonanza is the drawer. 
D)  Karen is the payee, First Bank is the drawer, and Bonanza is the drawee.

Question 15

Which of the following is true of an unqualified indorsement?

Accepted Answer

A)  The order and liability of the indorsers is presumed to be the order in which they indorse the instrument, unless otherwise agreed. 
B)  The first indorser is presumed to be liable for the full amount in the instrument, unless otherwise specifically agreed. 
C)  It guarantees payment of the instrument if the maker defaults. 
D)  It protects subsequent indorsees from liability. 
A)  The order and liability of the indorsers is presumed to be the order in which they indorse the instrument, unless otherwise agreed. 
B)  The first indorser is presumed to be liable for the full amount in the instrument, unless otherwise specifically agreed. 
C)  It guarantees payment of the instrument if the maker defaults. 
D)  It protects subsequent indorsees from liability.

Question 16

The signature requirement indicates that a negotiable instrument must be signed by ________.

Accepted Answer

A)  a witness 
B)  the maker 
C)  a drawee 
D)  the payee 
A)  a witness 
B)  the maker 
C)  a drawee 
D)  the payee

Question 17

A draft is a two-party instrument that is a conditional written order by one party to pay money to the other party.

Accepted Answer

A) True 
 B)False

Question 18

The transfer of a negotiable instrument by a person other than the issuer is known as ________.

Accepted Answer

A)  negotiation 
B)  assignment 
C)  indorsement 
D)  insurance 
A)  negotiation 
B)  assignment 
C)  indorsement 
D)  insurance

Question 19

A(n)________ is a type of instrument that is payable to anyone in physical possession of the instrument and presents it for payment when it is due.

Accepted Answer

A)  certificate of deposit 
B)  order instrument 
C)  bearer instrument 
D)  check 
A)  certificate of deposit 
B)  order instrument 
C)  bearer instrument 
D)  check

Question 20

Mike borrows $25,000 from Jill,and executes a promissory note stating that he will repay the money in one year.Mike also requests for a clause that allows him to repay the loan prior to the due date to which Jill agrees.In this scenario,Mike is requesting for a(n)________ clause.

Accepted Answer

A)  prepayment 
B)  acceleration 
C)  extension 
D)  forestallment 
A)  prepayment 
B)  acceleration 
C)  extension 
D)  forestallment

Exam 20: Creation and Transfer of Negotiable Instruments

A ________ is a special form of contract that satisfies the requirements established by Revised Article 3 of the UCC.

A(n)________ allows a payee or holder to quicken payment of the principal amount of an instrument,plus accrued interest,upon the occurrence of an event.

Hannah has to repay $4,678 to Ray.She draws a promissory note to that effect.How does executing a promissory note help Hannah in this case? Explain the different parties involved in it.

Which of the following is true of a promissory note?

A promissory note is an order to pay.

Harry orally promises to pay $7,543 that he owes to Rob.The next day,Rob wants the promise to be written on paper.In this scenario,Rob wants the ________ requirement to be fulfilled in order for the note to be binding.

A promissory note is an unconditional written promise by one party to pay money to another party.

A primary function of a negotiable instrument is that it acts as a substitute for ________.

Which of the following is a similarity between a bearer paper and an order paper?

Bill executes a negotiable instrument that is drawn on Kay Bank,payable to Beth.Which negotiable instrument has Bill executed? Explain the different parties involved in the instrument.

A promissory note is a note denying a debt.

What is certificate of deposit (CD)? Discuss the different types of CDs and the parties involved in a CD.

Karen has a checking account at First Bank.Karen writes a check to Bonanza Apartments for her rent.Which of the following is true of this situation?

Which of the following is true of an unqualified indorsement?

The signature requirement indicates that a negotiable instrument must be signed by ________.

A draft is a two-party instrument that is a conditional written order by one party to pay money to the other party.

The transfer of a negotiable instrument by a person other than the issuer is known as ________.

A(n)________ is a type of instrument that is payable to anyone in physical possession of the instrument and presents it for payment when it is due.

Mike borrows $25,000 from Jill,and executes a promissory note stating that he will repay the money in one year.Mike also requests for a clause that allows him to repay the loan prior to the due date to which Jill agrees.In this scenario,Mike is requesting for a(n)________ clause.

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