Question 1

Match each statement with the correct term below.
-shelter rule

Accepted Answer

A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument. 
A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument.

Question 2

What is electronic funds transfer? Why do banks like it? What provisions are in the law to protect the customer who uses electronic funds transfer?

Accepted Answer

EFT is any transfer of funds initiated t

Question 3

Match each statement with the correct term below.
-depositary

Accepted Answer

A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument. 
A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument.

Question 4

What is the effect of a payor bank's dishonor of a check?

Accepted Answer

A) It returns the check. 
B) The provisional credits must be reversed. 
C) The customer who deposited the item for collection must cover the item and seek recovery from the drawer or indorsers. 
D) All of the above will occur. 
A) It returns the check. 
B) The provisional credits must be reversed. 
C) The customer who deposited the item for collection must cover the item and seek recovery from the drawer or indorsers. 
D) All of the above will occur.

Question 5

A provisional credit occurs at the time a depositary bank permits a customer to draw funds against the deposited check.

Accepted Answer

A) True 
 B)False

Question 6

The Electronic Funds Transfer Act governs electronic transfers between financial institutions,between financial institutions and businesses,and between businesses.

Accepted Answer

A) True 
 B)False

Question 7

Match each statement with the correct term below.
-negotiability

Accepted Answer

A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument. 
A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument.

Question 8

Adjudication of drawer's incompetence will not affect the bank's ability to act with respect to the drawer until the bank knows and has a reasonable opportunity to act on this knowledge.

Accepted Answer

A) True 
 B)False

Question 9

Match each statement with the correct term below.
-check

Accepted Answer

A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument. 
A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument.

Question 10

When a payor bank gets an item payable from a customer's account with insufficient funds,the bank may:

Accepted Answer

A) pay the item and charge it to the customer's account even though an overdraft is created. 
B) dishonor the item and return it. 
C) Either (a) or (b). 
D) Neither (a) nor (b). 
A) pay the item and charge it to the customer's account even though an overdraft is created. 
B) dishonor the item and return it. 
C) Either (a) or (b). 
D) Neither (a) nor (b).

Question 11

A payment order for a wholesale funds transfer must:

Accepted Answer

A) be communicated in writing. 
B) contain no condition to payment other than the time of payment. 
C) be transmitted by the sender directly to the receiving bank. 
D) All of the above. 
A) be communicated in writing. 
B) contain no condition to payment other than the time of payment. 
C) be transmitted by the sender directly to the receiving bank. 
D) All of the above.

Exam 27: Bank Deposits, Collections, and Funds Transfers

Match each statement with the correct term below. -shelter rule

What is electronic funds transfer? Why do banks like it? What provisions are in the law to protect the customer who uses electronic funds transfer?

Match each statement with the correct term below. -depositary

What is the effect of a payor bank's dishonor of a check?

A provisional credit occurs at the time a depositary bank permits a customer to draw funds against the deposited check.

The Electronic Funds Transfer Act governs electronic transfers between financial institutions,between financial institutions and businesses,and between businesses.

Match each statement with the correct term below. -negotiability

Adjudication of drawer's incompetence will not affect the bank's ability to act with respect to the drawer until the bank knows and has a reasonable opportunity to act on this knowledge.

Match each statement with the correct term below. -check

When a payor bank gets an item payable from a customer's account with insufficient funds,the bank may:

A payment order for a wholesale funds transfer must:

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