Deck 20: Nature of Negotiable Instruments

Question 1

If commercial paper is made payable to whoever has possession of it, the bearer, it is called order paper.

Answer 1

False

Question 2

A commercial paper, which is made payable only to a named person, is called _____.

A) draft paper
B) bearer paper
C) order paper
D) holder paper

Answer 2

C

Question 3

Which of the following is true of electronic fund transfers?

A) It is a transfer of funds begun by a promissory note.
B) It is a transfer of funds begun by a telephonic instrument.
C) It is a transfer of funds begun by a check or draft.
D) It is a transfer of funds begun by any paper instrument.

Answer 3

B

Question 4

Electronic fund transfers that begin at retailers when consumers want to pay for goods or services with debit cards are called point-of-sale systems.

Question 5

Negotiable instruments are also known as instruments of collection.

Question 6

Explain preauthorized debits and credits.

Question 7

Which of the following is true of automated teller machines?

A) They enable customers to encash checks.
B) They enable customers to pay bills.
C) They do not enable customers to deposit checks.
D) They do not enable customers to transfer funds.

Question 8

The person who executes a promissory note is called the _____.

A) acceptor
B) endorser
C) indoser
D) maker

Question 9

Transferring is the act of transferring ownership of a negotiable instrument to another party.

Question 10

A written order by one person directing another to pay a sum of money to a third person is known as a(n)_____.

A) interest note
B) bill of exchange
C) debtor note
D) discounted bill

Question 11

Rules applied by courts set up by merchants in early England are known as the law merchant.

Question 12

The person who is ordered to pay a draft is called the _____.

A) drawer
B) acceptee
C) drawee
D) payee

Question 13

A preauthorized credit allows the amount of regular payments to be automatically deposited in the payee's  account.

Question 14

A holder who takes a negotiable instrument in good faith and for value is a holder in due course.

Question 15

A system of shortening the trip a bill of exchange makes from the payee to the drawee bank and then to the drawer is called _____.

A) automated truncation
B) credit truncation
C) payment truncation
D) check truncation

Question 16

The maker makes an indorsement by signing on the back of the instrument.

Question 17

A draft is also known as a promissory note.

Question 18

_____ are writings drawn in a special form that can be transferred from person to person as a substitute for money or as an instrument of credit.

A) Non-industrial papers
B) Commercial paper
C) Estate papers
D) Non-negotiable instruments

Question 19

The person to whom any negotiable instrument is made payable is called the drawer.

Question 20

Generally, a transfer initiated by a telephone call between a bank employee and a customer is an example of an electronic fund transfer.