Question 1

Which of the following is an incorrect statement regarding the requirements for an instrument to be negotiable?

Accepted Answer

A)  The instrument must be a written document.
B)  The instrument must be payable at a fixed future time,not on demand.
C)  The instrument must have an unconditional promise or order to pay.
D)  The amount to be paid in the instrument must be a sum certain in money.
E)  The document must contain either the words of negotiability-"to the order of"-or words indicating that it is a bearer instrument. B

Question 2

Used Car Commission.William promised to sell Helen's car for her,but he wanted a commission of 10%.Helen signed an instrument promising to pay William a 10% commission if he sold her car.William assigned the agreement to Phil.Helen's car was sold and the buyer paid Helen.A dispute ensued between Helen and William regarding whether William found the buyer or the buyer found Helen.When Phil asked Helen for payment on the instrument,Helen refused.William,Helen,and Phil settled their dispute without going to court,and Helen wrote Phil a check for $3,000.Phil endorsed the check on the back,planning to take it to the bank the next day.Unfortunately,Phil lost the check and it was found by Barry,who cashed it at the local bank.Barry then left town.Before Phil endorsed the check,it was a(n)________ instrument,and after he endorsed it,the check was a(n)________ instrument.

Accepted Answer

A)  order; order
B)  order; conditional
C)  order; bearer
D)  primary; bearer
E)  primary,order C

Question 3

A customer issues a stop-payment order when she has issued a check that has not yet been accepted and she wants the check to be accepted.

Accepted Answer

A) True 
 B)False  False

Question 4

A written document containing the signature of the creator that makes an unconditional promise or order to pay a sum certain in money at either a time certain or on demand is called a ________.

Accepted Answer

A)  negated instrument
B)  promised instrument
C)  negotiable instrument
D)  promissory agreement
E)  negotiable agreement

Question 5

Yard Mowing.Paula agreed to mow John's yard once a week for $50 per week throughout the summer.Paula,however,was having trouble getting her money from John.On one occasion,he gave her a handwritten IOU stating "I,John Jones,owe Paula Smith $50" which he signed at the end.A couple of weeks later,John did not have the money with which to pay Paula for additional mowing,and he handwrote the following on a piece of paper and gave it to her: "I,John Jones,promise to pay Paula Smith or to bearer,the sum of $100 on Monday,July 22,2017." Paula quit mowing John's yard,and disgusted with John,Paula assigned both documents to Vince.When Vince presented the documents to John,John refused to pay on the basis that after inspecting the yard,he decided that Paula was doing a poor job.Vince told him the documents constituted negotiable instruments,but John disagreed.Which of the following is true regarding whether the handwritten statement "I,John Jones,owe Paula Smith $50" coupled with the signature of John Jones is sufficient to constitute a negotiable instrument?

Accepted Answer

A)  The instrument is negotiable,because John Jones signed following the statement of debt.
B)  The instrument is negotiable,regardless of whether the debt obligation was expressed as an IOU.
C)  The instrument is negotiable,but only if Paula Smith does not attempt to transfer the document to another person.
D)  The instrument is not negotiable,because the amount owed Paula was overdue when the IOU was made.
E)  Acknowledging a debt through an IOU does not create an unconditional promise or order to pay.

Question 6

When a depositary bank receives a check,it must present the check at the payor bank and cannot send it through intermediary banks to reach the payor bank.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following governs consumer fund transactions?

Accepted Answer

A)  The Electronic Fund Transfer Act of 1978
B)  The Automated Transfer Act of 1990
C)  The Electronic Banking Act of 2000
D)  The Automated Fund Transfer Regulation of 2002
E)  The Uniform Commercial Monetary Services Act of 1990

Question 8

In the United States,of all the negotiable instruments regulated by the Uniform Commercial Code,which are the most common type used?

Accepted Answer

A)  Money orders
B)  Certificates of deposit
C)  Notes
D)  Demand instruments
E)  Checks

Question 9

If a negotiable instrument is payable to whomever possesses it,then it is a(n)________ instrument.

Accepted Answer

A)  demand
B)  order
C)  conditional
D)  bearer
E)  unqualified

Question 10

The Uniform Commercial Code requires a bank to certify a check if the customer has sufficient funds in his or her account.

Accepted Answer

A) True 
 B)False

Question 11

In the check collection process,the depositary bank cannot also be the payor bank.

Accepted Answer

A) True 
 B)False

Question 12

The Uniform Commercial Code requires an "instrument payable at a definite time" to have a time easily determined from the document itself.

Accepted Answer

A) True 
 B)False

Question 13

With a demand instrument,payment can be made only at a specific time designated in the future.

Accepted Answer

A) True 
 B)False

Question 14

What does the Truth-in-Savings Act require regarding information to be provided to customers before accounts are opened?

Accepted Answer

The answer of What does the Truth-in-Savings Act require regarding...

Question 15

In order for an instrument to be negotiable,the promise or order to pay must be ________ and not ________.

Accepted Answer

A)  general; expressed
B)  specific; implied
C)  general; implied
D)  specific; expressed
E)  equivocal; affirmative

Question 16

A promise made by a bank to pay a payee a certain amount of money at a future time is called a ________.

Accepted Answer

A)  note
B)  draft
C)  novation
D)  check
E)  certificate of deposit

Question 17

Which of the following are examples of negotiable instruments?

Accepted Answer

A)  Checks and oral agreements
B)  Drafts and stocks
C)  Notes and oral agreements
D)  Checks,drafts,and notes
E)  Checks and drafts,but not notes

Question 18

A(n)________ is a person receiving an endorsement.

Accepted Answer

A)  bailor
B)  transferor
C)  transferee
D)  endorser
E)  endorsee

Question 19

Instruments bearing joint payees require the endorsement of ________ before the instrument may be negotiated.

Accepted Answer

A)  any one of the listed payees
B)  a majority of the listed payees
C)  the most senior (i.e.,the oldest) payee
D)  all listed payees
E)  the drawee bank

Question 20

Set forth the six requirements for an instrument to be negotiable.

Accepted Answer

The answer of Set forth the six requirements for an...

Exam 17: Negotiable Instruments: Negotiability and Transferability

Which of the following is an incorrect statement regarding the requirements for an instrument to be negotiable?

A customer issues a stop-payment order when she has issued a check that has not yet been accepted and she wants the check to be accepted.

A written document containing the signature of the creator that makes an unconditional promise or order to pay a sum certain in money at either a time certain or on demand is called a ________.

When a depositary bank receives a check,it must present the check at the payor bank and cannot send it through intermediary banks to reach the payor bank.

Which of the following governs consumer fund transactions?

In the United States,of all the negotiable instruments regulated by the Uniform Commercial Code,which are the most common type used?

If a negotiable instrument is payable to whomever possesses it,then it is a(n) ________ instrument.

The Uniform Commercial Code requires a bank to certify a check if the customer has sufficient funds in his or her account.

In the check collection process,the depositary bank cannot also be the payor bank.

The Uniform Commercial Code requires an "instrument payable at a definite time" to have a time easily determined from the document itself.

With a demand instrument,payment can be made only at a specific time designated in the future.

What does the Truth-in-Savings Act require regarding information to be provided to customers before accounts are opened?

In order for an instrument to be negotiable,the promise or order to pay must be and not .

A promise made by a bank to pay a payee a certain amount of money at a future time is called a ________.

Which of the following are examples of negotiable instruments?

A(n) ________ is a person receiving an endorsement.

Instruments bearing joint payees require the endorsement of ________ before the instrument may be negotiated.

Set forth the six requirements for an instrument to be negotiable.