Exam 20: Nature of Negotiable Instruments

Negotiable instruments are also known as instruments of collection.

Which of the following is true of automated teller machines?

The maker makes an indorsement by signing on the back of the instrument.

A draft is also known as a promissory note.

The person to whom any negotiable instrument is made payable is called the drawer.

Electronic fund transfers that begin at retailers when consumers want to pay for goods or services with debit cards are called point-of-sale systems.

If commercial paper is made payable to whoever has possession of it, the bearer, it is called order paper.

A system of shortening the trip a bill of exchange makes from the payee to the drawee bank and then to the drawer is called _____.

A holder who takes a negotiable instrument in good faith and for value is a holder in due course.

The person who is ordered to pay a draft is called the _____.

Rules applied by courts set up by merchants in early England are known as the law merchant.

The person who executes a promissory note is called the _____.

Explain preauthorized debits and credits.

A preauthorized credit allows the amount of regular payments to be automatically deposited in the payee's  account.

_____ are writings drawn in a special form that can be transferred from person to person as a substitute for money or as an instrument of credit.

A commercial paper, which is made payable only to a named person, is called _____.

A written order by one person directing another to pay a sum of money to a third person is known as a(n)_____.

Which of the following is true of electronic fund transfers?

Transferring is the act of transferring ownership of a negotiable instrument to another party.

Generally, a transfer initiated by a telephone call between a bank employee and a customer is an example of an electronic fund transfer.