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

Accepted Answer

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 transit number. The account number is a unique number assigned to the account itself, the check number is the sequential number printed on each individual check, and the NSF number refers to insufficient funds.

Question 2

Check use in the United States is beginning to decline.

Accepted Answer

According to various reports, check use in the United States has been declining steadily over the past few years due to the rise of digital payment methods like credit/debit cards and mobile payments.

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

Accepted Answer

A bounced check is a check that is returned unpaid due to insufficient funds in the account.

Question 4

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

Accepted Answer

A debit card directly deducts the amount purchased from the person's account and transfers it to the account of the retailer at the point of sale. Therefore, a debit card is the correct choice. Charge card, credit card, and cash card do not directly transfer money from a person's account to a retailer's account.

Question 5

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

Accepted Answer

A restrictive endorsement, such as "For Deposit Only," limits the use of the check to the specific instruction stated, in this case, depositing the check into an account.

Question 6

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

Accepted Answer

While it is recommended to pay off your credit card balance in full every month to avoid interest charges, it is not always required. Minimum payments can be made, but this will result in interest charges accumulating on the remaining balance.

Question 7

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

Accepted Answer

Transit numbers, also known as routing numbers, are indeed issued to financial institutions, including those that hold accounts at a Federal Reserve Bank, to identify them in financial transactions.

Question 8

Which of the following is NOT an element of negotiability?

Accepted Answer

Negotiability refers to the qualities that make a written document a negotiable instrument. While a negotiable instrument must contain a signature, be in writing, and state a specific amount to be paid, it does not have to be payable on demand. A negotiable instrument can also be payable at a definite time.

Question 9

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

Accepted Answer

The most common form of negotiable instrument is actually a check, not a promissory note.

Question 10

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

Accepted Answer

The Uniform Commercial Code of 1958 largely eliminated the wide variation of legal regulation from the country's payments system by establishing consistent guidelines for commercial transactions across all US states. The other options either created or modified aspects of the payments system but did not have as significant of an impact on legal regulation standardization.

Question 11

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

Accepted Answer

Banks often have different check-cashing policies for customers versus non-customers, including fees and identification requirements, which is legal and common practice.

Question 12

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

Accepted Answer

It is legal to write a postdated check as long as the recipient does not cash or deposit it before the date written on the check. However, some banks may still process the check if the recipient attempts to cash it early, so it is important to communicate with the recipient about the postdated nature of the check.

Question 13

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

Accepted Answer

A check can also be written electronically, such as through online banking or mobile banking apps.

Question 14

A check cannot be negotiated until it has been endorsed.

Accepted Answer

Endorsement is necessary to transfer ownership of the check to another person or entity before it can be negotiated.

Question 15

Which of the following endorsements is the least secure?

Accepted Answer

A blank endorsement, which is simply the signature of the payee, is the least secure because it allows anyone to cash or deposit the check.

Question 16

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

Accepted Answer

Negotiation of a negotiable instrument refers to the process by which the holder transfers the instrument to another party, thereby enabling the new holder to claim the value of the instrument. It does not directly relate to the conditions or terms of the instrument itself, but rather to the ability of the holder to transfer and thus obtain its value.

Question 17

The person who signs a draft is the

Accepted Answer

The person who signs a draft is the drawer. They are the ones who create and initiate the draft, directing the drawee to pay the specified amount to the payee. The drawee is the one who is directed to pay, the payee is the one who receives the payment, and the bearer is the person who presents the draft for payment.

Question 18

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

Accepted Answer

The Federal Reserve processes a significant portion of checks, but not 90 percent. The check clearing process also involves private sector entities and other financial institutions.

Question 19

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

Accepted Answer

The payee is the name of the person or entity who is authorized to receive the funds. The signature and memo may provide additional information, but they do not indicate who is to receive the funds. The bearer refers to the person who physically holds the check.

Question 20

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

Accepted Answer

A full endorsement actually allows the transfer and further negotiation of a check by specifying the person to whom the check is endorsed.

Quiz 6: Negotiable Instruments