Exam 22: Creation of Negotiable Instruments

How does an authorized representative's signature work for negotiable instruments?

To qualify as a negotiable instrument, a promise cannot state any other undertaking by the person promising other than the payment of money.

A certificate of deposit is an order to pay.

A(n)________ is an exception in promissory notes, as it does not require the maker's unconditional and affirmative promise to pay.

Promises to pay and orders to pay must be unconditional in order to be negotiable.

A prepayment clause allows the payee or holder to accelerate payment of the principal amount of an instrument.

Negotiable instruments help in creating a credit economy.

Which of the following is considered as a distinction of a check?

Security posted by promissory note maker to the lender for repayment of money is known as collateral.

A(n)________ is a clause in an instrument that permits the maker to pay the amount due prior to the date of the instrument.

What is a trade acceptance?

Once an appointed authorized representative signs a negotiable instrument, while unambiguously disclosing his or her agency status, and the identity of the maker or drawer, then, ________.

Who is the drawee of a check?

Which of the following is true about a draft?

Mike deposited $100, 000 in a bank and procured a certificate of deposit on it, payable to himself, and for repayment in 5 years with a 5 percent interest rate.A year after that, Mike borrows $25, 000 from Jill, and gives her a promissory note to repay it in one year.As collateral, Mike gave Jill the certificate of deposit and asked to put in a prepayment clause to which Jill agreed.They mutually agreed that Mike could repay in monthly payments, as mentioned it in the note. -What kind of promissory note has Jill and Mike decided on?

A trade acceptance is a two-party transaction.

In a draft transaction, the payee or the drawer is allowed to freely transfer drafts as a negotiable instrument to another party.

A negotiable instrument should be in writing in order to be considered valid.

Give an account of the requirement for a fixed amount in negotiable instruments?

An acknowledgement of debt is sufficient to consider a promissory note as a negotiable instrument.