Question 1

If a customer's debit card is lost or stolen, the customer will not be liable for any unauthorized use of the card.

Accepted Answer

A) True 
 B)False

Question 2

Kip writes a check for $1,000 drawn on Local Bank and presents it to Mira. Mira presents the check for payment to Local Bank, which dis?hon?ors it. The party most likely liable to Mira is

Accepted Answer

A)  Kip in a civil suit. 
B)  Kip in a criminal prosecution. 
C)  Local Bank in an administrative proceeding. 
D)  neither Kip nor Local Bank.

Question 3

A bank that fails to detect an alteration to its customer's check is liable to the customer for the loss.

Accepted Answer

A) True 
 B)False

Question 4

Dru signs a check "pay to the order of Eppie" drawn on Dru's account in First Federal Bank. Greta forges Eppie's indorsement. First Federal pays the check. Most likely

Accepted Answer

A)  Dru will be liable for the amount. 
B)  Eppie will have to pay Dru for the amount. 
C)  First Federal will have to recredit Dru's account. 
D)  the Federal Reserve will reimburse all parties for their costs.

Question 5

A customer who fails to examine a bank statement and report a forged signa?ture may be liable for later forgeries by the same wrongdoer.

Accepted Answer

A) True 
 B)False

Question 6

A cashier's check is an instrument in which a bank draws a check on itself.

Accepted Answer

A) True 
 B)False

Question 7

Rikki signs a check "pay to the order of Scholar University" drawn on Rikki's account in State Bank to pay her tuition. Rikki is

Accepted Answer

A)  the certifier. 
B)  the drawee. 
C)  the drawer. 
D)  the payee.

Question 8

A bank cannot recover from a holder who cashes a check bearing a forged indorsement once the bank has accepted and paid the item.

Accepted Answer

A) True 
 B)False

Question 9

Kris presents an instrument that states "pay to the order of Liv" to Metro Bank for payment. This is a special type of draft drawn on a bank, ordering the bank to pay a fixed amount of money on demand. This is

Accepted Answer

A)  a certificate of deposit. 
B)  a check. 
C)  a debit card transaction receipt. 
D)  a trade acceptance.

Question 10

Financial institutions that exchange digital images of checks eventually must exchange the original paper checks.

Accepted Answer

A) True 
 B)False

Question 11

Liu signs a check "pay to the order of Marv" drawn on Liu's account in National Bank. Liu later orders National not to pay the check, but the bank pays it over Liu's order. Subsequent checks written on Liu's account "bounce." Most likely liable for the costs to Liu is

Accepted Answer

A)  any party to whom a subsequent check was written. 
B)  Liu. 
C)  Marv. 
D)  National.

Question 12

Generally, a bank has no obligation to pay a customer's overdrafts.

Accepted Answer

A) True 
 B)False

Question 13

Generally, the funds represented by a deposited local check must be avail?able for withdrawal within one business day.

Accepted Answer

A) True 
 B)False

Question 14

A check carries with it an implied promise to reimburse the bank for paying the check.

Accepted Answer

A) True 
 B)False

Question 15

City Bank mistakenly transfers $1,000 from the account of Donna, its cus?tomer, to the account of Earl in First Federal Bank. The transfer is done electronically. When City Bank learns of the mistake, it credits Donna's account and asks First Federal to "return" $1,000. First Federal refuses. City Bank files a suit against First Federal, claiming that it is violation of the Electronic Fund Transfer Act. How might the court rule?

Accepted Answer

The answer of City Bank mistakenly transfers $1,000 from the...

Question 16

A bank that encodes information on an item after its issue warrants to any subsequent bank that the information is correct.

Accepted Answer

A) True 
 B)False

Question 17

Clyde issues a check payable to Discount Mart. Elle, Discount's cashier, forges the store's indorsement and deposits the check in her bank ac?count. Clyde's bank, First State Bank, pays the check. Clyde can recover from

Accepted Answer

A)  Elle, but not First State Bank. 
B)  First State Bank, which cannot recover from Elle. 
C)  First State Bank, which can recover from Elle. 
D)  no one.

Question 18

A stale check is one that has been outstanding for longer than one month.

Accepted Answer

A) True 
 B)False

Question 19

A forged signature is effective as the signature of a drawer to the extent that is resembles the drawer's actual signature.

Accepted Answer

A) True 
 B)False

Question 20

UCC Articles 3 and 4 govern checks.

Accepted Answer

A) True 
 B)False

Exam 27: Checks, the Banking System, and E-Money

If a customer's debit card is lost or stolen, the customer will not be liable for any unauthorized use of the card.

Kip writes a check for $1,000 drawn on Local Bank and presents it to Mira. Mira presents the check for payment to Local Bank, which dis?hon?ors it. The party most likely liable to Mira is

A bank that fails to detect an alteration to its customer's check is liable to the customer for the loss.

Dru signs a check "pay to the order of Eppie" drawn on Dru's account in First Federal Bank. Greta forges Eppie's indorsement. First Federal pays the check. Most likely

A customer who fails to examine a bank statement and report a forged signa?ture may be liable for later forgeries by the same wrongdoer.

A cashier's check is an instrument in which a bank draws a check on itself.

Rikki signs a check "pay to the order of Scholar University" drawn on Rikki's account in State Bank to pay her tuition. Rikki is

A bank cannot recover from a holder who cashes a check bearing a forged indorsement once the bank has accepted and paid the item.

Kris presents an instrument that states "pay to the order of Liv" to Metro Bank for payment. This is a special type of draft drawn on a bank, ordering the bank to pay a fixed amount of money on demand. This is

Financial institutions that exchange digital images of checks eventually must exchange the original paper checks.

Liu signs a check "pay to the order of Marv" drawn on Liu's account in National Bank. Liu later orders National not to pay the check, but the bank pays it over Liu's order. Subsequent checks written on Liu's account "bounce." Most likely liable for the costs to Liu is

Generally, a bank has no obligation to pay a customer's overdrafts.

Generally, the funds represented by a deposited local check must be avail?able for withdrawal within one business day.

A check carries with it an implied promise to reimburse the bank for paying the check.

A bank that encodes information on an item after its issue warrants to any subsequent bank that the information is correct.

Clyde issues a check payable to Discount Mart. Elle, Discount's cashier, forges the store's indorsement and deposits the check in her bank ac?count. Clyde's bank, First State Bank, pays the check. Clyde can recover from

A stale check is one that has been outstanding for longer than one month.

A forged signature is effective as the signature of a drawer to the extent that is resembles the drawer's actual signature.

UCC Articles 3 and 4 govern checks.