Deck 22: Introduction to Commercial Paper

Question 1

Commercially acceptable documents, such as notes, checks, and drafts, are used to transfer money from one person to another.

Answer 1

True

Question 2

The purpose of the Electronic Funds Transfer Act of 1979 is to govern transfers among financial institutions or among businesses.

Answer 2

False

Question 3

Most states have statutes making a person who issues a check drawn on a bank in which he or she has no account guilty of the criminal offense of larceny.

Answer 3

True

Question 4

Commercial paper differs from ordinary contracts because of the:

A) presumption of consideration and assignability.
B) ability to negotiate the commercial paper.
C) validity of the commercial paper.
D) ability to negotiate the contract.

Question 5

A cashier's check is drawn against the depositor's own funds.

Question 6

The promise in a note, or the order in a check or draft, must be conditional.

Question 7

Commercial paper includes checks that banks are ordered to pay, but not drafts in which a third party is ordered to pay.

Question 8

Forged checks are illegal, whereas raised checks are not.

Question 9

Checks are sometimes payable on demand.

Question 10

An item of commercial paper containing the key words of negotiability, such as "pay to the order of," or their equivalent, is a(n):

A) price quotation.
B) grade instrument.
C) order instrument.
D) bill of lading.

Question 11

The person who makes a promise is called a 'drawer'.

Question 12

Commercial paper may be handwritten, printed, or written by any other means that will make a mark.

Question 13

A written order drawn on a bank by a depositor that requests the bank to pay, on demand and unconditionally, a definite sum of money to the bearer of the instrument or to the order of a specified person is called a:

A) price quotation.
B) promissory note.
C) check.
D) demand note.

Question 14

An instrument with an unconditional written promise to pay, or pay to the order of another party, a certain sum of money on demand or at a definite time is known as a:

A) garnishee order.
B) negotiable instrument.
C) stop-payment order.
D) restraining order.

Question 15

When the amount of a check expressed in figures does not agree with the amount stated in words, the amount expressed in words is considered the true one.

Question 16

An instrument payable in a foreign currency is negotiable.

Question 17

The two basic types of commercial paper are promises to pay through notes and orders to pay through checks and drafts.

Question 18

A written note or letter in which one person promises to pay a certain amount of money to another at a definite time is known as a:

A) cashier's check.
B) promissory note.
C) certified check.
D) demand draft.

Question 19

A person may not postdate a check for self-protection when some act is to be completed by the payee before the date of the check.

Question 20

A certified check is one that the bank has promised to pay when it is presented for payment.

Question 21

Whoever is in possession of commercial paper is called the holder. The holder can be all of the following, EXCEPT the:

A) payee.
B) drawee.
C) drawer.
D) co-maker.

Question 22

A __________ is a certified check issued in a denomination of $20 or more by certain banks, travel agencies, and financial services companies.

A) traveler's check
B) promissory check
C) cashier's check
D) stale check

Question 23

The Electronic Funds Transfer Act of 1979 (EFTA) establishes the rights, responsibilities, and liabilities of consumers in dealings with:

A) charitable institutions.
B) educational institutions.
C) cultural institutions.
D) financial institutions.

Question 24

Statements requiring that certain things be done or that specific events take place before payment make the instrument a ___________ rather than commercial paper.

A) simple contract
B) statutory contract
C) contingent contract
D) specialty contract

Question 25

Because it has the opportunity to inspect a check at the time of payment, the ____ is liable if it pays a raised check, unless the drawer, through carelessness, wrote the check in such a way that it could easily be altered.

A) drawee
B) maker
C) bank
D) payee

Question 26

Commercial paper that is dated ahead is:

A) antedated.
B) mandated.
C) dictated.
D) postdated.

Question 27

An instruction a depositor gives to his or her bank not to pay a particular check is known as a(n):

A) stop-payment order.
B) garnishee order.
C) endorsed order.
D) temporary protective order.

Question 28

A system which allows a consumer to transfer funds from a bank account to the merchant's bank account to pay for merchandise purchased is known as a:

A) buying facilitation system.
B) pay-by-phone system.
C) point-of-credit system.
D) point-of-sale system.

Question 29

A __________ check is one that is dated later than the date the check is written.

A) certified
B) forged
C) bad
D) postdated

Question 30

A check presented more than six months after its date is known as a:

A) cashier's check.
B) certified check.
C) traveler's check.
D) stale check.

Question 31

The parties involved in a draft or a check have particular names. The person who receives the money is called the:

A) payee.
B) drawer.
C) holder.
D) payer.

Question 32

An Automated Teller Machine performs many of the functions of a bank as would a

A) manager.
B) cashier.
C) teller.
D) attorney.

Question 33

An instrument should contain any of the following words of negotiability in order to make an instrument negotiable EXCEPT the words:

A) "payable to bearer."
B) "payable to the order of."
C) "payable to endorser."
D) "payable to cash."

Question 34

________ is the act of fraudulently making or altering a note, check, draft, or some other document, causing the financial loss of another.

A) Larceny
B) Forgery
C) Conversion
D) Robbery

Question 35

The person who is expected to pay a draft or check must be named or otherwise indicated in the instrument with reasonable certainty for the instrument to be considered:

A) void.
B) negotiable.
C) voidable.
D) unenforceable.

Question 36

If a drawer of a check has the bank certify it, he or she remains _________for payment of the check until the holder can reasonably present it for payment.

A) partially liable
B) totally liable
C) not liable
D) conditionally liable

Question 37

Electronic funds transfer (EFT) refers to a variety of electronic applications for handling:

A) goods.
B) money.
C) instruments.
D) shipments.

Question 38

A _________ provides a safe means of transferring money and serves as a receipt when paid and canceled by the bank.

A) check
B) non-negotiable note
C) bond
D) promissory note

Question 39

Any writing that includes the essential elements of negotiability is considered a valid check when signed and delivered by the:

A) payee.
B) maker.
C) endorser.
D) drawer.

Question 40

All of the following are essential to negotiable commercial paper EXCEPT the fact that it must be:

A) in writing and signed by the maker or drawer.
B) payable to order, to bearer, or to cash.
C) on forms provided by a bank.
D) payable on demand or at a definite time.

Question 41

Describe the rules and procedures for stopping payment on a check.

Question 42

State the differences between commercial paper and an ordinary contract.

Question 43

Describe a cashier's check, who can issue one, and to whom it can be made payable.