Question 1

Thalia signs an instrument unconditionally promising to pay to "Union Bank" $7500 with interest in installments with the final payment due June 1,2017.
-Refer to Fact Pattern 23-3. With respect to this instrument,Union Bank is
A)thedrawee.
B)theindorser.
C)themaker.
D)the payee.

Accepted Answer

Union Bank is the payee because Thalia has promised to pay the amount to Union Bank, making them the recipient of the payment.

Question 2

Thalia signs an instrument unconditionally promising to pay to "Union Bank" $7500 with interest in installments with the final payment due June 1,2017.
-Refer to Fact Pattern 23-3. The instrument that Thalia signed is most likely
A)a certificate of deposit.
B)a draft.
C)an order to pay.
D)a promissory note.

Accepted Answer

The instrument that Thalia signed is a promissory note because it is an unconditional promise to pay a certain amount of money with interest in installments, and it has a final payment due date. Certificates of deposit are a type of savings account, drafts are orders to pay from one person to another, and orders to pay are typically issued by one party to another as a form of payment.

Question 3

Emily writes and signs a check payable to "Festival Cinema." Georg,Festival's manager,indorses the check "For deposit only." This is
A)a blank indorsement.
B)a qualified indorsement.
C)a restrictive indorsement.
D)a special indorsement.

Accepted Answer

Georg's indorsement "For deposit only" is a restrictive indorsement because it limits the use of the check to deposit only and does not authorize any further transfer or negotiation of the check.

Question 4

Petra signs a check payable to Quentin,who indorses the back,gives it to Regional Credit Union (RCU),and receives cash. The transfer of the check from Quentin to RCU is
A)an assignment.
B)a negotiation.
C)a payment.
D)a sale.

Accepted Answer

This is a clear example of negotiation, where the payee (Quentin) endorses the back of the check and transfers it to the Regional Credit Union (RCU). RCU then becomes the new holder of the check and can receive the amount from the payer's (Petra's) account.

Question 5

Lindsey,an accountant for Madison & Monroe,acquires a negotiable instrument from Norma by promising to pay its face value in thirty days. Lindsey acquires the status of an HDC when she
A)acquires possession of the negotiable instrument.
B)promises to pay the face value due on the instrument.
C)pays the face value due on the instrument.
D)transfers the instrument to another party.

Accepted Answer

The answer of Lindsey,an accountant for Madison & Monroe,acquires a...

Question 6

On the back of a check payable to Nero,he writes "Pay to Odell,without recourse" and signs it. This
A)does not effect the check's negotiability or any party's liability.
B)relieves Nero of liability on the check.
C)relieves Odell of liability on the check.
D)renders the check nonnegotiable.

Accepted Answer

When Nero writes "Pay to Odell, without recourse" on the back of the check, he is essentially transferring the check to Odell and relieving himself of liability. Odell can still negotiate the check, but Nero is no longer responsible for any potential issues with the check.

Question 7

Alvin signs a promissory note payable to the order of Borrow & Spend Loan Company. The note states that it is payable "with interest at the legal rate." This note is
A)negotiable.
B)notnegotiable,because it does not specify a rate of interest.
C)notnegotiable,because it is a promissory note.

Accepted Answer

The promissory note is negotiable because it meets the requirements of negotiability, such as being in writing, containing an unconditional promise to pay a certain amount, and payable to order. The fact that it specifies interest at the legal rate is sufficient, as the legal rate of interest varies depending on the jurisdiction.

Question 8

Bart,the owner of Clear Cut Corporation,signs an instrument that includes the phrase "payment for this note will be made from the proceeds of next year's timber sale." This instrument is
A)negotiable.
B)notnegotiable,because payment can be made only out of a particular source.
C)notnegotiable,because it states an express condition to payment.
D)notnegotiable,because the reasons for the note are not clear on its face.

Accepted Answer

The answer of Bart,the owner of Clear Cut Corporation,signs an...

Question 9

Bernice signs a promissory note for $1,500 in favor of Community College. The note is undated but specifies that it is "payable one month after date." This note is
A)negotiable.
B)notnegotiable,because one month is not a reasonable time.
C)notnegotiable,because there is no option to pay early.
D)notnegotiable,because the maturity date cannot be deter-mined from the face of the instrument.

Accepted Answer

The note is not negotiable because it lacks a specific date, making it impossible to determine the maturity date from the face of the instrument.

Question 10

Avril receives a payroll check from Business Solutions,Inc.,and indorses it by signing her name on the back of the check. This is
A)a blank indorsement.
B)a qualified indorsement.
C)a restrictive indorsement.
D)a special indorsement.

Accepted Answer

Avril's indorsement by simply signing her name on the back of the check is a blank indorsement. A blank indorsement is an indorsement that does not specify the indorsee’s name and which makes the instrument payable to the bearer.

Question 11

Gwen deposits $5,000 with Home State Bank on July 1,2016. Home State Bank promises to repay Gwen the $5,000 plus 3 percent annual interest on July 1,2021. Home State Bank issued to Gwen
A)acertificate of deposit.
B)a check.
C)anonnegotiable instrument.
D)a trade acceptance.

Accepted Answer

A certificate of deposit is a time deposit offered by banks, where the depositor agrees to leave the money on deposit for a specified period of time. In return, the bank pays a higher rate of interest than would be paid on a regular savings account. The fact that Home State Bank promises to repay Gwen on a specific date in the future with a specific interest rate makes this a certificate of deposit.

Question 12

Barry draws a check payable to "Cash" and presents it to Dollars & Sensestore for payment. This instrument is
A)a bearer instrument.
B)an order instrument.
C)valid but nonnegotiable.
D)void.

Accepted Answer

A check payable to "cash" is considered a bearer instrument because it can be negotiated by anyone who possesses the physical check. The bearer of the instrument is the person entitled to receive payment.

Question 13

O'Malley negotiates an order instrument to Phil by
A)anassignment of O'Malley's rights under a contract.
B)adelivery to Phil with any necessary indorsement.
C)making an unconditional promise to pay.
D)presenting it in response to a demand by Phil.

Accepted Answer

Delivery and necessary indorsement are requirements for negotiating an order instrument.

Question 14

Sergio makes a gift of a check to Todd who takes it in good faith and without notice of any claim,defense,or defect. With respect to this check,Todd is
A)none of the choices.
B)an assignee.
C)an ordinary holder.
D)an ordinary holder in due course.

Accepted Answer

The answer of Sergio makes a gift of a check...

Question 15

Talia,who is not a Urban Bank customer,attempts to cash a check drawn on the bank. The check is considered dishonored if Urban Bank
A)refuses to pay it.
B)charges a fee to cash it.
C)asks Talia for reasonable identification.
D)asks Talia to sign a receipt for the payment on the check.

Accepted Answer

A check is considered dishonored if the bank refuses to pay it, regardless of whether or not the person attempting to cash it is a customer of the bank.

Question 16

Mortimer negotiates an instrument to Nelson. Negotiation is the transfer of an instrument
A)for valuable consideration under a contract.
B)in such form that the transferee becomes a holder.
C)pursuant to preliminary contract discussions.
D)without the payment of a recognized medium of exchange.

Accepted Answer

Negotiation is the process by which an instrument, such as a check or promissory note, is transferred from one person to another in a way that the transferee becomes the holder of the instrument. The transfer must be made for valuable consideration, such as money or the satisfaction of a debt, and must conform to the requirements of the instrument itself and applicable law. Choice A also includes the requirement for consideration, but it is not necessary to mention the contract itself as a requirement for negotiation. Choices C and D are incorrect because they are not essential elements of negotiation.

Question 17

To finance the purchase of a house from Tuna,Uri signs an instrument promising to pay to "Verity Mortgage Service" $160,000 with interest in installments with the final payment due July 10,2045. To be negotiable,this instrument must include the signature of
A)a non-party witness.
B)Tuna or Tuna's realtor.
C)Uri.
D)Verity's chief financial officer.

Accepted Answer

The negotiable instrument must include the signature of the person promising to pay - in this case, Uri. While witnesses or other parties may sign the instrument, they are not required for it to be negotiable. Tuna or Tuna's realtor may also sign the document, but their signature is not necessary for negotiability. Verity's chief financial officer is not relevant to the negotiability of the instrument.

Question 18

To finance the purchase of an electric guitar and amplifier from Leon's Guitars,Milo signs an instrument promising to pay to "National Lenders" $1,800 with interest in installments with the final payment due August 15,2016. To be negotiable,this instrument must include on its face
A)any conditions on the sale of the goods.
B)any conditions to the disbursement of the funds.
C)any conditions to the repayment of the loan.
D)no conditions.

Accepted Answer

For an instrument to be negotiable, it must not include any conditions or limitations. The only requirements are that it be in writing, signed by the maker, contain a promise or order to pay a specific amount of money, and be payable on demand or at a definite time. Therefore, no conditions should be included on the face of the instrument for it to be negotiable.

Question 19

Vicenzo,in good faith and for value,gets from Wren a check "payable to the order of bearer." Vicenzo does not know that Wren stole the check. Vicenzo is
A)an HDC.
B)not an HDC,because Wren did not acquire the check for value.
C)not an HDC,because Wren did not acquire the check in good faith.
D)not an HDC,because the check is a bearer instrument.

Accepted Answer

Vicenzo is an HDC (holder in due course) because he acquired the check in good faith for value and without knowledge of any defects in the title. The fact that the check is payable to the order of bearer does not affect Vicenzo's status as an HDC.

Question 20

Pedro signs an instrument that states it is being executed "as per a contract for the sale of a case of apples dated May 1." This instrument is
A)negotiable.
B)notnegotiable,because banks cannot easily process commodities.
C)notnegotiable,because it includes the specific date of a contract.
D)notnegotiable,because it refers to an express contract.

Accepted Answer

The answer of Pedro signs an instrument that states it...

Quiz 23: Negotiable Instruments

Thalia signs an instrument unconditionally promising to pay to "Union Bank" $7500 with interest in installments with the final payment due June 1,2017. -Refer to Fact Pattern 23-3. With respect to this instrument,Union Bank is

Thalia signs an instrument unconditionally promising to pay to "Union Bank" $7500 with interest in installments with the final payment due June 1,2017. -Refer to Fact Pattern 23-3. The instrument that Thalia signed is most likely

Emily writes and signs a check payable to "Festival Cinema." Georg,Festival's manager,indorses the check "For deposit only." This is

Petra signs a check payable to Quentin,who indorses the back,gives it to Regional Credit Union (RCU) ,and receives cash. The transfer of the check from Quentin to RCU is

Lindsey,an accountant for Madison & Monroe,acquires a negotiable instrument from Norma by promising to pay its face value in thirty days. Lindsey acquires the status of an HDC when she

On the back of a check payable to Nero,he writes "Pay to Odell,without recourse" and signs it. This

Alvin signs a promissory note payable to the order of Borrow & Spend Loan Company. The note states that it is payable "with interest at the legal rate." This note is

Bart,the owner of Clear Cut Corporation,signs an instrument that includes the phrase "payment for this note will be made from the proceeds of next year's timber sale." This instrument is

Bernice signs a promissory note for $1,500 in favor of Community College. The note is undated but specifies that it is "payable one month after date." This note is

Avril receives a payroll check from Business Solutions,Inc.,and indorses it by signing her name on the back of the check. This is

Gwen deposits $5,000 with Home State Bank on July 1,2016. Home State Bank promises to repay Gwen the $5,000 plus 3 percent annual interest on July 1,2021. Home State Bank issued to Gwen

Barry draws a check payable to "Cash" and presents it to Dollars & Sensestore for payment. This instrument is

O'Malley negotiates an order instrument to Phil by

Sergio makes a gift of a check to Todd who takes it in good faith and without notice of any claim,defense,or defect. With respect to this check,Todd is

Talia,who is not a Urban Bank customer,attempts to cash a check drawn on the bank. The check is considered dishonored if Urban Bank

Mortimer negotiates an instrument to Nelson. Negotiation is the transfer of an instrument

To finance the purchase of a house from Tuna,Uri signs an instrument promising to pay to "Verity Mortgage Service" $160,000 with interest in installments with the final payment due July 10,2045. To be negotiable,this instrument must include the signature of

To finance the purchase of an electric guitar and amplifier from Leon's Guitars,Milo signs an instrument promising to pay to "National Lenders" $1,800 with interest in installments with the final payment due August 15,2016. To be negotiable,this instrument must include on its face

Vicenzo,in good faith and for value,gets from Wren a check "payable to the order of bearer." Vicenzo does not know that Wren stole the check. Vicenzo is

Pedro signs an instrument that states it is being executed "as per a contract for the sale of a case of apples dated May 1." This instrument is