Question 1

The Federal Reserve System,which consists of ________ regional Federal Reserve banks located in different geographical areas of the country,assists banks in the collection of checks.

Accepted Answer

The Federal Reserve System consists of twelve regional Federal Reserve banks located in different geographical areas of the country. These banks work together to provide services to depository institutions such as collecting and clearing checks.

Question 2

Regarding the bank collection process,for an "on them" item,the drawee is also the:

Accepted Answer

An "on them" item refers to a check or draft that is drawn on the same bank that is also the drawee, making it the payer bank.

Question 3

When a bank pays a check that has been materially altered to a higher amount,assuming the bank is given appropriate notice when the drawer discovers the alteration,the bank:

Accepted Answer

The bank can charge the depositor's account for the original amount of the check and recover the additional amount from the person who presented the check for payment, even if that person did not know the check was altered.

Question 4

When a bank has wrongfully dishonored a check,the payee can:

Accepted Answer

The answer of When a bank has wrongfully dishonored a...

Question 5

The drawer's failure to report a forged or altered check to the bank within ________ of receiving the bank statement and canceled checks containing it relieves the bank of any liability for paying the instrument.

Accepted Answer

The answer of The drawer's failure to report a forged...

Question 6

In connection with a checking account at a bank,what is an overdraft?

Accepted Answer

An overdraft occurs when a bank pays a check from a customer's checking account even when there are insufficient funds in the account. This results in a negative balance in the account, which is called an overdraft. Option A refers to a bounced check, while option C refers to a check that hasn't been cashed yet. Option D is a general statement about loans and checking accounts, while option E refers to a bounced deposit.

Question 7

Stop- payment orders:

Accepted Answer

An oral stop-payment order is effective for 14 days unless confirmed in writing within that period, which then extends its effectiveness to six months.

Question 8

A written stop-payment order can be renewed in writing for additional ________ periods.

Accepted Answer

A written stop-payment order can be renewed in writing for additional six-month periods.

Question 9

The ________ posting rule allows banks to fix an afternoon hour of 2:00 p.m.or later as a cutoff hour for the purpose of processing checks and deposits.

Accepted Answer

The term "deferrable" refers to something that can be postponed or delayed. "Post-dating" refers to writing a future date on a check, which is not relevant to the question. "Dilatory" means causing a delay, which is not relevant to the question. "Referred" means directed or passed on to someone else, which is not relevant to the question. Therefore, the correct answer is B, "deferred," as it describes the rule that allows banks to delay processing checks and deposits until a designated cutoff time.

Question 10

Drawers sometimes write checks that omit certain information,such as the amount of the check or the payee's name,either on purpose or by mistake.These are called ________ checks.

Accepted Answer

The checks described in the question are known as incomplete checks.

Question 11

Banks in the collection process that are not the depository or payer bank are called ________ banks.

Accepted Answer

Banks in the collection process that are not the depository or payer bank are called intermediary banks. These banks play a role in transferring the funds between the payer bank and the depository bank, but they do not hold the funds themselves.

Question 12

The following are commonly used terms to describe banks in the collection system except:

Accepted Answer

The term "maker bank" is not commonly used in the collection system to describe a bank's role. The other terms are commonly used: 
- The collecting bank is the bank that receives the payment on behalf of the beneficiary. 
- The depository bank is the bank that holds the account of the collecting bank. 
- The intermediary bank is a bank that facilitates the payment between the payer bank and the collecting bank. 
- The payer bank is the bank that holds the account of the party making the payment.

Question 13

The Uniform Commercial Code places the risk of loss on an incomplete check on the:

Accepted Answer

The Uniform Commercial Code (UCC) places the risk of loss on the drawer of an incomplete check, as they are responsible for ensuring the check is properly completed and any alterations or issues arising from incompleteness fall on them.

Question 14

When a drawee bank is presented with a check drawn on a customer's account in which there are not sufficient funds to pay the check,the bank:

Accepted Answer

The bank has the discretion to pay or not pay the check if there are insufficient funds, but it can only charge interest on the overdraft if the customer has previously agreed to such terms.

Question 15

If the same wrongdoer engages in a series of forgeries or alterations on the same account,the customer must report that the payer bank within a reasonable period of time,not exceeding ________ from the date that the bank statement was made available to the customer.

Accepted Answer

The correct answer is A because the Regulation E states that the customer must report the unauthorized transaction within 30 days of the bank statement being made available to the customer.

Question 16

The Federal Currency Reporting Law requires financial institutions to file a Currency Transaction Report with the Internal Revenue Service,reporting the receipt in a single transaction or a series of related transactions of cash in an amount greater than:

Accepted Answer

The Federal Currency Reporting Law requires financial institutions to file a Currency Transaction Report with the IRS for any transaction, or related series of transactions, in which the institution receives more than $10,000 in cash.

Question 17

Which of the following is true?

Accepted Answer

Some banks use private clearinghouses, instead of the Federal Reserve System, to process checks. This allows for faster processing times and potentially lower fees.

Question 18

________ credit is a situation in which a collecting bank gives credit to a check in the collection process prior to its final settlement.

Accepted Answer

Provisional credit is a type of credit provided by a collecting bank during the check collection process before the check is finally settled. It is a temporary credit that can be revoked if the check is returned unpaid or the item is rejected during the final settlement process.

Question 19

A check that has been outstanding from more than ________ is considered "stale," and the bank is under no obligation to pay it.

Accepted Answer

According to general banking practices, a stale check is one that has been outstanding for more than six months. Banks are not obligated to pay such checks because they may have been lost or stolen, or the account may have been closed in the meantime. Therefore, it is important to deposit or cash a check promptly to avoid the risk of it becoming stale.

Question 20

If a party presents a check containing a forged signature to a bank for payment that the bank pays,from whom can the bank collect,assuming the bank is given appropriate notice when the drawer discovers the forgery?

Accepted Answer

The answer of If a party presents a check containing...

Quiz 22: Banking System, E-Money, and Financial Reform