Question 1

Alpha Company issues a trade acceptance with itself and Beta Company as parties. A trade acceptance is

Accepted Answer

A)  a draft. 
B)  an order to accept delivery of money. 
C)  a promise to accept delivery of goods. 
D)  a promise to deliver goods. 
A)  a draft. 
B)  an order to accept delivery of money. 
C)  a promise to accept delivery of goods. 
D)  a promise to deliver goods. A

Question 2

Willy deposits $5,000 with Home State Bank on July 1, 2012. Home State Bank promises to repay Willy the $5,000 plus 3 percent annual interest on July 1, 2017. Home State Bank has issued Willy a

Accepted Answer

A)  certificate of deposit. 
B)  cashier's check. 
C)  trade acceptance. 
D)  draft. 
A)  certificate of deposit. 
B)  cashier's check. 
C)  trade acceptance. 
D)  draft. A

Question 3

A maker of an instrument that is payable at a definite time does not have the option of paying before the stated date.

Accepted Answer

A) True 
 B)False  False

Question 4

Biff signs a note "payable to the order of County Credit Union." Unless Biff has a valid defense against payment, Biff's liability on this note is

Accepted Answer

A)  nothing. 
B)  primary. 
C)  secondary. 
D)  conditional. 
A)  nothing. 
B)  primary. 
C)  secondary. 
D)  conditional.

Question 5

Maria signs an instrument payable to the order of National Loans, Inc., "on or before" June 15. This instrument is

Accepted Answer

A)  negotiable. 
B)  nonnegotiable, because the maker can move up the payment date. 
C)  nonnegotiable, because moving up the payment date is optional. 
D)  nonnegotiable, because the exact payment date cannot be deter?mined from the face of the instrument. 
A)  negotiable. 
B)  nonnegotiable, because the maker can move up the payment date. 
C)  nonnegotiable, because moving up the payment date is optional. 
D)  nonnegotiable, because the exact payment date cannot be deter?mined from the face of the instrument.

Question 6

Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

Accepted Answer

A) True 
 B)False

Question 7

A person who acquires an instrument knowing that the instrument contains an unauthorized signature can still be afforded HDC protection.

Accepted Answer

A) True 
 B)False

Question 8

To borrow money to finance the start-up of his business, Bob executes an instrument in favor of City Bank. For the instru?ment to be negotiable, the signature must be

Accepted Answer

A)  anywhere on the instrument. 
B)  anywhere on the lower half of the instrument only. 
C)  in the lower left-hand corner of the instrument only. 
D)  in the lower right-hand corner of the instrument only. 
A)  anywhere on the instrument. 
B)  anywhere on the lower half of the instrument only. 
C)  in the lower left-hand corner of the instrument only. 
D)  in the lower right-hand corner of the instrument only.

Question 9

Kris wants one of Jasmine's purebred Persian kittens. Kris signs an instrument in which she promises to pay Jasmine for a kitten. The instrument will be negotiable if it is payable in

Accepted Answer

A)  goods of equal market value. 
B)  money. 
C)  any of the choices. 
D)  shares in stock. 
A)  goods of equal market value. 
B)  money. 
C)  any of the choices. 
D)  shares in stock.

Question 10

Ralph signs an instrument promising to pay a total of $10,000 to Martha in $1,000 monthly installments with the final payment being made on August 1. Ralph unexpectedly inherits $10,000 from his aunt on May 15. Ralph may

Accepted Answer

A)  not complete his $10,000 payment before August 1. 
B)  complete his $10,000 payment before August 1. 
C)  increase his monthly payments by five percent, but not more. 
D)  increase his monthly payments by ten percent, but not more. 
A)  not complete his $10,000 payment before August 1. 
B)  complete his $10,000 payment before August 1. 
C)  increase his monthly payments by five percent, but not more. 
D)  increase his monthly payments by ten percent, but not more.

Question 11

A signature must be the full name of a party.

Accepted Answer

A) True 
 B)False

Question 12

Beth, an accountant for Credits & Debits, acquires a negotiable instru?ment from Ellen by promis?ing to pay its face value in thirty days. Beth ac?quires the status of an HDC when she

Accepted Answer

A)  acquires possession of the negotiable instrument. 
B)  agrees with Ellen to buy the negotiable instrument. 
C)  pays the face value due on the instrument. 
D)  transfers the instrument to another party. 
A)  acquires possession of the negotiable instrument. 
B)  agrees with Ellen to buy the negotiable instrument. 
C)  pays the face value due on the instrument. 
D)  transfers the instrument to another party.

Question 13

A promise to give value in the future is sufficient to confer the rights of an HDC on one in possession of a negotiable instrument.

Accepted Answer

A) True 
 B)False

Question 14

Wilson buys a promissory note from Oli. The note is due on December 5. December 5 is a Sunday. The note is

Accepted Answer

A)  payable anytime the week of December 6. 
B)  payable December 6. 
C)  payable on December 5 only. 
D)  defective. 
A)  payable anytime the week of December 6. 
B)  payable December 6. 
C)  payable on December 5 only. 
D)  defective.

Question 15

A person cannot become an HDC if a defense against payment is appar?ent on the face of the instrument.

Accepted Answer

A) True 
 B)False

Question 16

A special indorsement names the indorsee.

Accepted Answer

A) True 
 B)False

Question 17

Jeff's grandmother is the payee of a promissory note for $7,500. Jeff's grandmother gives Jeff the note for his sixteenth birthday. Jeff is

Accepted Answer

A)  an HDC. 
B)  not an HDC, because he received the note as a gift. 
C)  not an HDC, because he is a minor. 
D)  not an HDC, because the note was for less than $10,000. 
A)  an HDC. 
B)  not an HDC, because he received the note as a gift. 
C)  not an HDC, because he is a minor. 
D)  not an HDC, because the note was for less than $10,000.

Question 18

Universal defenses are good against all holders except HDCs and holders through HDCs.

Accepted Answer

A) True 
 B)False

Question 19

To obtain office supplies for All-Care Medical Clinic, Britney executes a draft in favor of Chris. A draft is

Accepted Answer

A)  a conditional promise to pay money. 
B)  an unconditional written order to pay money. 
C)  a qualified promise to set aside a sum of money. 
D)  a restricted promise to deliver goods at a future date. 
A)  a conditional promise to pay money. 
B)  an unconditional written order to pay money. 
C)  a qualified promise to set aside a sum of money. 
D)  a restricted promise to deliver goods at a future date.

Question 20

A promissory note can be a negotiable instrument.

Accepted Answer

A) True 
 B)False

Exam 21: Negotiable Instruments: Transferability Liability

Alpha Company issues a trade acceptance with itself and Beta Company as parties. A trade acceptance is

Willy deposits $5,000 with Home State Bank on July 1, 2012. Home State Bank promises to repay Willy the $5,000 plus 3 percent annual interest on July 1, 2017. Home State Bank has issued Willy a

A maker of an instrument that is payable at a definite time does not have the option of paying before the stated date.

Biff signs a note "payable to the order of County Credit Union." Unless Biff has a valid defense against payment, Biff's liability on this note is

Maria signs an instrument payable to the order of National Loans, Inc., "on or before" June 15. This instrument is

Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

A person who acquires an instrument knowing that the instrument contains an unauthorized signature can still be afforded HDC protection.

To borrow money to finance the start-up of his business, Bob executes an instrument in favor of City Bank. For the instru?ment to be negotiable, the signature must be

Kris wants one of Jasmine's purebred Persian kittens. Kris signs an instrument in which she promises to pay Jasmine for a kitten. The instrument will be negotiable if it is payable in

Ralph signs an instrument promising to pay a total of $10,000 to Martha in $1,000 monthly installments with the final payment being made on August 1. Ralph unexpectedly inherits $10,000 from his aunt on May 15. Ralph may

A signature must be the full name of a party.

Beth, an accountant for Credits & Debits, acquires a negotiable instru?ment from Ellen by promis?ing to pay its face value in thirty days. Beth ac?quires the status of an HDC when she

A promise to give value in the future is sufficient to confer the rights of an HDC on one in possession of a negotiable instrument.

Wilson buys a promissory note from Oli. The note is due on December 5. December 5 is a Sunday. The note is

A person cannot become an HDC if a defense against payment is appar?ent on the face of the instrument.

A special indorsement names the indorsee.

Jeff's grandmother is the payee of a promissory note for $7,500. Jeff's grandmother gives Jeff the note for his sixteenth birthday. Jeff is

Universal defenses are good against all holders except HDCs and holders through HDCs.

To obtain office supplies for All-Care Medical Clinic, Britney executes a draft in favor of Chris. A draft is

A promissory note can be a negotiable instrument.

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