Exam 22: Creation of Negotiable Instruments

What is a trade acceptance?

Who is the acceptor of a draft in a draft transaction?

To be negotiable, a draft or check must contain the drawer's unconditional order to pay a payee.

A nonnegotiable contract is rendered either nontransferable or unenforceable.

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

Mike deposited $100,000 in a bank and procured a certificate of deposit on it, payable to himself, for repayment in five years with a five percent interest rate. A year after that, Mike borrowed $25,000 from Jill, and gave 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 agreed that Mike could repay in monthly payments, as mentioned in the note. What kind of promissory note have Jill and Mike decided on?

In a draft transaction, the payee is called the acceptor of the draft.

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

A bill of exchange is a type of sight draft.

A check is a type of promissory note.

Promissory notes are never payable on demand.

Which of the following is true of a trade acceptance?

Which of the following must a promissory note contain to make it negotiable?

Which of the following statements is true of a negotiable instrument?

A ________ is a two-party negotiable instrument that is an unconditional written pledge by one party to pay money to another party.

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

The primary benefit of a negotiable instrument is that it can be used as a substitute for money.

Which of the following is true of a bearer paper?

Who is the drawee of a check?

A promissory note is a two-party instrument.