Question 1

Which of the following rules of interpretation is applied to resolve conflict or ambiguity in a check?

Accepted Answer

A)  Printed terms prevail over typewritten terms. 
B)  Typewritten terms prevail over handwritten terms. 
C)  Where words and numbers conflict, the words control the numbers. 
D)  Where handwritten terms and printed terms conflict, printed terms prevail over handwritten terms. 
A)  Printed terms prevail over typewritten terms. 
B)  Typewritten terms prevail over handwritten terms. 
C)  Where words and numbers conflict, the words control the numbers. 
D)  Where handwritten terms and printed terms conflict, printed terms prevail over handwritten terms. C

Question 2

Which of the following statements is true of the monetary aspect of a promise or order in a negotiable instrument?

Accepted Answer

A)  The promise or order in a negotiable instrument must be to pay a fixed amount of money. 
B)  The requirement of a "fixed amount" in a negotiable instrument applies only to interest and not principal. 
C)  The amount of any interest payable is not described in the instrument. 
D)  The amount of principal is calculated by reference to the formula or index referenced in the instrument if a variable rate of interest is prescribed. 
A)  The promise or order in a negotiable instrument must be to pay a fixed amount of money. 
B)  The requirement of a "fixed amount" in a negotiable instrument applies only to interest and not principal. 
C)  The amount of any interest payable is not described in the instrument. 
D)  The amount of principal is calculated by reference to the formula or index referenced in the instrument if a variable rate of interest is prescribed. A

Question 3

A holder in due course takes the instrument free of all:

Accepted Answer

A)  defenses and claims to the instrument. 
B)  defenses and claims to the instrument except those which concern its validity. 
C)  defenses and claims to the instrument except those which concern its negotiability. 
D)  defenses and claims to the instrument including defenses of duress or infancy. 
A)  defenses and claims to the instrument. 
B)  defenses and claims to the instrument except those which concern its validity. 
C)  defenses and claims to the instrument except those which concern its negotiability. 
D)  defenses and claims to the instrument including defenses of duress or infancy. B

Question 4

Many banks no longer issue certificates of deposit in paper form.

Accepted Answer

A) True 
 B)False

Question 5

A certificate of deposit is:

Accepted Answer

A)  an instrument in which the maker makes an unconditional promise to pay a fixed amount of money with interest to the payee on demand. 
B)  the most widely used form of commercial paper that is a draft payable on demand and drawn on a bank. 
C)  an instrument in which the maker makes an unconditional promise to pay a fixed amount of money without interest to the payee at the specified future time. 
D)  an instrument containing an acknowledgment by a bank that it has received a deposit of money and a promise to repay the sum of money. 
A)  an instrument in which the maker makes an unconditional promise to pay a fixed amount of money with interest to the payee on demand. 
B)  the most widely used form of commercial paper that is a draft payable on demand and drawn on a bank. 
C)  an instrument in which the maker makes an unconditional promise to pay a fixed amount of money without interest to the payee at the specified future time. 
D)  an instrument containing an acknowledgment by a bank that it has received a deposit of money and a promise to repay the sum of money.

Question 6

Commercial paper is:

Accepted Answer

A)  the basic selling document of a 1933 Act registered offering. 
B)  a public offer by a bidder to purchase a target company's equity securities. 
C)  a way to either issue immediate payment or to extend credit. 
D)  any unit of goods that is treated by commercial usage as a single whole. 
A)  the basic selling document of a 1933 Act registered offering. 
B)  a public offer by a bidder to purchase a target company's equity securities. 
C)  a way to either issue immediate payment or to extend credit. 
D)  any unit of goods that is treated by commercial usage as a single whole.

Question 7

The purpose of determining negotiability is to ascertain whether a possessor of the instrument can become a holder in due course.

Accepted Answer

A) True 
 B)False

Question 8

When a person buys a television set and gives the merchant a check drawn on his checking account, that person uses a form of negotiable commercial paper.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following instruments is negotiable?

Accepted Answer

A)  A note that states, "I promise to pay Vlad $800 if he repairs my car" 
B)  An instrument that provides, "Payment is subject to the terms of a contract dated November 20, 2009" 
C)  A note that contains the statement, "This note is secured by a mortgage dated July 01, 2009" 
D)  An instrument that reads, "I promise to pay to the order of Collin Corp. $550 sixty days after the delivery of my new refrigerator" 
A)  A note that states, "I promise to pay Vlad $800 if he repairs my car" 
B)  An instrument that provides, "Payment is subject to the terms of a contract dated November 20, 2009" 
C)  A note that contains the statement, "This note is secured by a mortgage dated July 01, 2009" 
D)  An instrument that reads, "I promise to pay to the order of Collin Corp. $550 sixty days after the delivery of my new refrigerator"

Question 10

If there are conflicting terms on commercial paper, typewritten terms prevail over handwritten terms.

Accepted Answer

A) True 
 B)False

Question 11

Jamal borrowed money from Amir to buy school supplies. He drew up and signed the following promissory note, "IOU, Amir Shah, the sum of $30 for value received. Jamal Khan." Is the note a negotiable instrument?

Accepted Answer

No, this note is not a negotiable instru

Question 12

Which of the following statements is true of commercial paper?

Accepted Answer

A)  It cannot be used as a means of extending credit. 
B)  It is covered in Article 5 and Article 6 of the Uniform Commercial Code. 
C)  It can be accepted as a substitute for money. 
D)  It lacks the attribute of negotiability. 
A)  It cannot be used as a means of extending credit. 
B)  It is covered in Article 5 and Article 6 of the Uniform Commercial Code. 
C)  It can be accepted as a substitute for money. 
D)  It lacks the attribute of negotiability.

Question 13

A person could create a negotiable instrument in pencil on a piece of wrapping paper.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is true of the negotiability of a written instrument?

Accepted Answer

A)  The Uniform Commercial Code considers only instruments that are handwritten as negotiable. 
B)  An instrument written on a piece of wrapping paper will be considered a poor business practice and will not be negotiable. 
C)  The writing of an instrument does not have to be on any particular material; all that is required is that it be in writing to be negotiable. 
D)  An instrument written in pencil does not qualify as a negotiable instrument. 
A)  The Uniform Commercial Code considers only instruments that are handwritten as negotiable. 
B)  An instrument written on a piece of wrapping paper will be considered a poor business practice and will not be negotiable. 
C)  The writing of an instrument does not have to be on any particular material; all that is required is that it be in writing to be negotiable. 
D)  An instrument written in pencil does not qualify as a negotiable instrument.

Question 15

Tasmia signed a check payable to the order of Shubha. The check contained an obvious variance between the numbers and the written words. The numbers indicated that the bank should pay $13,000 to the order of Shubha, but the written words indicated the bank should pay "the sum of thirteen hundred dollars." Under these circumstances what amount, if any, should the bank pay to the order of Shubha?

Accepted Answer

A)  $1,300 
B)  $13,000 
C)  $6,500 
D)  $650 
A)  $1,300 
B)  $13,000 
C)  $6,500 
D)  $650

Question 16

If an instrument meets all of the formal requirements required for negotiability, _____.

Accepted Answer

A)  it is negotiable even though it is void or unenforceable for other reasons 
B)  it cannot be held by a person who had no notice of certain defenses against payment 
C)  its validity is automatically conferred 
D)  it is nonnegotiable if uncollectible 
A)  it is negotiable even though it is void or unenforceable for other reasons 
B)  it cannot be held by a person who had no notice of certain defenses against payment 
C)  its validity is automatically conferred 
D)  it is nonnegotiable if uncollectible

Question 17

If there are conflicting terms on commercial paper, printed terms prevail over handwritten terms.

Accepted Answer

A) True 
 B)False

Question 18

What is the difference between a promissory note and a check? Why is the distinction important?

Accepted Answer

A promissory note is the simplest form o

Question 19

Under revised Article 3 of the Uniform Commercial Code, an exception to the rule that an instrument payable on demand is not payable before the date of the instrument is made for:

Accepted Answer

A)  checks. 
B)  promissory notes. 
C)  a holder in due course. 
D)  certificates of deposits. 
A)  checks. 
B)  promissory notes. 
C)  a holder in due course. 
D)  certificates of deposits.

Question 20

The promissory note is a debit instrument.

Accepted Answer

A) True 
 B)False

Exam 38: Negotiable Instruments

Which of the following rules of interpretation is applied to resolve conflict or ambiguity in a check?

Which of the following statements is true of the monetary aspect of a promise or order in a negotiable instrument?

A holder in due course takes the instrument free of all:

Many banks no longer issue certificates of deposit in paper form.

A certificate of deposit is:

Commercial paper is:

The purpose of determining negotiability is to ascertain whether a possessor of the instrument can become a holder in due course.

When a person buys a television set and gives the merchant a check drawn on his checking account, that person uses a form of negotiable commercial paper.

Which of the following instruments is negotiable?

If there are conflicting terms on commercial paper, typewritten terms prevail over handwritten terms.

Jamal borrowed money from Amir to buy school supplies. He drew up and signed the following promissory note, "IOU, Amir Shah, the sum of $30 for value received. Jamal Khan." Is the note a negotiable instrument?

Which of the following statements is true of commercial paper?

A person could create a negotiable instrument in pencil on a piece of wrapping paper.

Which of the following is true of the negotiability of a written instrument?

If an instrument meets all of the formal requirements required for negotiability, _____.

If there are conflicting terms on commercial paper, printed terms prevail over handwritten terms.

What is the difference between a promissory note and a check? Why is the distinction important?

Under revised Article 3 of the Uniform Commercial Code, an exception to the rule that an instrument payable on demand is not payable before the date of the instrument is made for:

The promissory note is a debit instrument.

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