Deck 20: Nature of Negotiable Instruments

Question 1

The act of transferring ownership of commercial paper to another party, is called .

A)drafting
B)guaranty
C)negotiation
D)endorsement

Answer 1

C

Question 2

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

Answer 2

False

Question 3

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

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

Answer 3

C

Question 4

​ Widespread use of instruments of credit appeared as international trade began to flourish in the wake of the Crusades.

Question 5

The maker executes a note by signing on the back of the instrument.

Question 6

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 7

Explain preauthorized debits and credits.

Question 8

The person who executes a promissory note is called the .

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

Question 9

Which of the following is true of automated teller machines?

A)They enable customers to cash 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 10

Negotiable instruments have replaced the instruments of collection which existed under the law merchant.

Question 11

A drawee who takes responsibility for paying a draft is called the acceptor.

Question 12

Checks and trade acceptances are special types of promissory notes.

Question 13

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 14

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 15

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

Question 16

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

Question 17

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

Question 18

Under the Electronic Fund Transfer Act, a customer's liability for an unauthorized EFT can be limited to $50.

Question 19

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 20

How does negotiation differ from assignment?

A)It consists of the right to receive payments.
B)It is the only mechanism by which a negotiable instrument may be transferred.
C)A party receiving an instrument by negotiation may obtain rights superior to those of the original holder.
D)A party receiving an instrument by negotiation receives only the rights of the transferor and no more.