Exam 19: Definition, Creation, and Categories of Negotiable Instruments

A draft involves three parties:

A __________ is a specialized type of order and draft payable on demand and drawn on a bank.

An __________ is a signature, other than that of a signer as maker, drawer or acceptor of the instrument, for the purpose of negotiating the instrument.

Describe in detail the process of securitization for a special purpose vehicle (SPV).

The process of packaging promissory notes and negotiating their sale to investors is called securitization.

Mediations are the various steps used to transfer a negotiable instrument from party to party through a legally defined process.

A __________ is the various steps used to transfer a negotiable instrument from party to party through a legally defined process.

A draft may be either a time draft, which is payable at a determined future date, or a __________ draft, which is payable at any time upon demand once it is presented to the drawee.

A __________ is simply a written order to pay money signed by the person giving the order.

A __________ is any type of loan whereby one party offers to lend a specific amount of money with repayment in the future.

A check is a written order to pay money signed by the person giving the order.

The __________ packages thousands of auto loans and sells them to a separate corporation, called a special purpose vehicle (SPV), which is created specifically to own these notes.

An unqualified indorsement does not include any language that __________ the indorser's nonpayment liability.

An __________ can be classified as a draft or a check.

A negotiable instrument is a conditional promise or order.

A __________ specifically identifies the party to whom the instrument is to be payable.

James issues a signed written promise that states, "I promise to pay Irvin $20,000 if he sells me his Jeep before March 29." Does this qualify as a negotiable instrument? Why or why not?

If an instrument is classified as a negotiable instrument, it can be readily exchanged or sold to third parties for free.

The process of packaging promissory notes and negotiating their sale to investors is called __________.

If the instrument is classified as a negotiable instrument, it can be readily exchanged or sold to third parties for __________.