Deck 6: Negotiable Instruments

Question 1

The 9-digit number printed on a check that identifies the bank that holds the checking account and is responsible for payment is called the

A)transit number.
B)account number.
C) check number.
D) NSF number.

Answer 1

A

Question 2

Check use in the United States is beginning to decline.

Answer 2

True

Question 3

Marisol has written a $500 check to Stephen, but she has only $300 in her account and it is returned unpaid to Stephen. Marisol has written a

A)floating check.
B)promissory note.
C) postdated check.
D) bounced check.

Answer 3

D

Question 4

Which of the following directly transfers money from a person's account to the account of a retailer?

A)charge card
B)credit card
C) debit card
D) cash card

Question 5

Which of the following is an example of a restrictive endorsement?

A)"For Deposit Only"
B)the signature of the holder
C) "Pay to the Order of Tevin Washington"
D) "Pay to the Order of Jill Davies, without recourse"

Question 6

You must pay off your credit card account in full at the end of every month.

Question 7

Transit numbers are not issued to financial institutions that hold accounts at a Federal Reserve Bank.

Question 8

Which of the following is NOT an element of negotiability?

A)must contain a signature
B)must be written
C) must be payable on demand
D) must state the amount to be paid

Question 9

The most common form of negotiable instrument is a promissory note.

Question 10

Which of the following largely eliminated the wide variation of legal regulation from the country's payments system?

A)Federal Reserve Act of 1913
B)Uniform Commercial Code of 1958
C) National Banking Act of 1864
D) Expedited Funds Availability Act of 1987

Question 11

It is illegal for a bank to make different check-cashing rules for customers and noncustomers.

Question 12

Under some circumstances, it is legal to write a postdated check.

Question 13

A check must be written on paper in order to be legal.

Question 14

A check cannot be negotiated until it has been endorsed.

Question 15

Which of the following endorsements is the least secure?

A)qualified endorsement
B)full endorsement
C) restrictive endorsement
D) blank endorsement

Question 16

The term negotiation, as it applies to a negotiable instrument, applies to

A)the ability of the holder to obtain its value.
B)the conditions of the instrument.
C) the terms of the instrument.
D) all of the above.

Question 17

The person who signs a draft is the

A)drawee.
B)drawer.
C) payee.
D) bearer.

Question 18

The Federal Reserve clears about 90 percent of the checks written in the U.S.

Question 19

Which of the following features of a check indicates who is to receive the funds?

A)the bearer
B)the signature
C) the payee
D) the memo

Question 20

A full endorsement limits both the transferability and the further negotiability of a check.

Question 21

When the same funds are counted in two depository banks, the funds are called ____________________.

Question 22

A(n) ____________________ instrument is payable to whoever holds it.

Question 23

This morning Clarissa had a balance in her checking account of $1765.98. She wrote three checks: one to the baker for $74.68, one to the florist for $54.39, and one to her mother for $500. She also took her $750 paycheck to the bank and deposited half of it into her account; the other half she took as cash. What is her account balance at the end of the day?

Question 24

Define biometrics and provide two examples of biometrics.

Question 25

A(n) ____________________ check is a check that is dated later than the date on which it is actually written.

Question 26

What three things are shown by a check's identification numbers?

Question 27

____________________ cards have embedded microchips and use embedded logic to change and store values and record transactions.

Question 28

Online systems called _________________________ allow consumers to pay each other directly for a product.

Question 29

A(n) ____________________ endorsement transfers a check to another specified party.

Question 30

Define the term elements of negotiability and list the six elements.

Question 31

In banking, who is the holder in due course?

Question 32

Mrs. Rodriguez had $1,306.35 in her bank account on December 1. On December 3, she deposited her paycheck of $1,500.00. On December 4, she wrote four checks in the following amounts: $35.65, $204.55, $216.76, and $23.42. She made an ATM withdrawal of $50 on December 5. What is her account balance the morning of December 6?

Question 33

A bill of ____________________ is a negotiable and unconditional written order addressed by one party to another.

Question 34

Why do banks encourage the use of cash cards?

Question 35

This morning Terran had a balance in his checking account of $208.68. During the day he wrote two checks: one to his friend George for $23.00 and one to the comic book shop for $13.75. What is his account balance at the end of the day?

Question 36

A(n) ____________________ card allows a consumer to make purchases, but the account must be paid in full at the end of the month.

Question 37

What is a draft? When is a draft typically used?

Question 38

What is a promissory note?

Question 39

A written order or promise to pay a sum of money is called a(n) ____________________ instrument.

Question 40

A short-term note or draft issued by a corporation or government is called ____________________ paper.

Question 41

Name and describe the technology used most frequently in the U.S. for contactless payments.

Question 42

What is GoDirect and why is it important?

Question 43

What is float? Name three specific ways it can be caused. What effect does float have on the money supply?

Question 44

What did the Uniform Commercial Code (UCC) largely eliminate?

Question 45

Explain the Uniform Commercial Code (UCC) rules for a postdated check.

Question 46

What is the difference between electronic check conversion and Check 21?

Question 47

What is EFT? Discuss two common forms of EFT. What are the advantages of EFT?

Question 48

Name and define the four primary types of endorsement. Which is the most commonly used?

Question 49

What technology enabled Check 21? Describe how this technology achieves costs savings.

Question 50

Why was the Expedited Funds Availability Act (EFAA) of 1987 passed, and what rules did it direct the Fed to set?