Question 1

An oral stop-payment order is effective for seven days.

Accepted Answer

A) True 
 B)False

Question 2

Article 4 of the Uniform Commercial Code establishes the requirements for negotiable instruments.

Accepted Answer

A) True 
 B)False

Question 3

Assuming the bank has proper notice,which of the following situations would not allow the bank to rightfully dishonor a check?

Accepted Answer

A)  the drawer's death or incompetence 
B)  The check was drawn 4 months ago. 
C)  a court order freezing the account 
D)  a stop- payment order 
E)  the exercise of a right of setoff

Question 4

Why does the law generally place the risk of forgery on the payor bank,yet place the risk of unauthorized completion on the drawer? What factors would justify a difference in liability of the bank? What factors would justify a difference in liability of the drawer?

Accepted Answer

The answer of Why does the law generally place the...

Question 5

When a bank wrongfully dishonors a check,both the drawer and the payee can recover reasonable damages from the bank.

Accepted Answer

A) True 
 B)False

Question 6

When a bank has wrongfully dishonored a check,the payee can:

Accepted Answer

A)  sue the bank for recovery of the check amount, plus damages. 
B)  sue the drawer for recovery of the check amount, plus damages. 
C)  sue the drawer or the bank for recovery of the check amount, plus damages. 
D)  sue either the drawer or the bank for recovery of the check amount only. 
E)  sue the drawer for recovery of the check amount only.

Question 7

Bank checks are usually considered "as good as cash" because the bank is solely or primarily liable for payment.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true?

Accepted Answer

A)  All banks must process all checks through the Federal Reserve System. 
B)  All banks must process all "on them" checks through the Federal Reserve System. 
C)  The Federal Reserve System includes at least one regional bank in each state. 
D)  The Federal Reserve System is not permitted to charge a fee for is processing services. 
E)  Some banks use private clearinghouses, instead of the Federal Reserve System, to process checks.

Question 9

Jenny has a checking account at Intrastate Bank.Jenny loses her checkbook.Richard finds it and forges a check payable to himself,indorses it,and properly negotiates it to Yummy Treats Restaurant.Yummy Treats cashes the check at Intrastate.Jenny learns of the forgery and complains to Intrastate.What are the liabilities of each of the parties involved?

Accepted Answer

The answer of Jenny has a checking account at Intrastate...

Question 10

When a drawee bank is presented with a check drawn on a customer's account in which there are not sufficient funds to pay the check,the bank:

Accepted Answer

A)  must pay the check if the customer is an established customer. 
B)  is not permitted to pay the check. 
C)  must notify the drawer before deciding whether or not to pay the check. 
D)  may choose whether to pay the check, but cannot charge interest on the overdraft unless the customer previously agreed to the payment of overdraft interest. 
E)  may choose whether to pay the check, and can charge interest on the overdraft in all circumstances.

Question 11

The collection process is governed by Article 2 of the Uniform Commercial Code.

Accepted Answer

A) True 
 B)False

Question 12

In connection with a checking account at a bank,what is an overdraft?

Accepted Answer

A)  a check that the bank does not pay, due to insufficient funds in the account 
B)  a negative balance caused by a bank paying a check when there are insufficient funds in the drawer's checking account 
C)  a post-dated check for a larger amount than the drawer's checking account balance 
D)  any kind of loan at a bank where a customer also has a checking account 
E)  a deposit by a customer that is later returned because of insufficient funds

Question 13

Why are there such rigid and short deadlines for banks to decide whether to pay items? Does the midnight deadline force banks into making payment decisions before they have adequate information?

Accepted Answer

The answer of Why are there such rigid and short...

Question 14

The drawer's failure to report a forged or altered check to the bank within ________ of receiving the bank statement and canceled checks containing it relieves the bank of any liability for paying the instrument.

Accepted Answer

A)  thirty (30) days 
B)  sixty (60) days 
C)  ninety (90) days 
D)  one (1) year 
E)  three (3) years

Question 15

When a payee or holder receives a check,he or she can either go to the payer bank and present the check for payment in cash,or deposit the check into the depository bank.

Accepted Answer

A) True 
 B)False

Question 16

A bank cannot pay a drawer's check if sufficient funds are not in the drawer's account,unless prior arrangements,such as an overdraft protection line of credit,have been made.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is characteristic of both cashier's checks and traveler's checks?

Accepted Answer

A)  requirement of a countersignature when used 
B)  usually available only in certain fixed denominations 
C)  must be certified before they can be negotiated 
D)  They are frequently issued by companies other than banks. 
E)  The same party serves as both the drawee and the drawer.

Question 18

When the payee of a check indorses a check to another person (the indorsee),what is true about the indorsee?

Accepted Answer

A)  The indorsee must get the consent of the drawer to further transfer the check. 
B)  In order to collect on the check, the indorsee must present the check for payment at the drawee bank. 
C)  The indorsee cannot indorse the check to another indorsee. 
D)  The indorsee becomes a holder, who can either demand payment, or indorse the check to yet another indorsee. 
E)  The indorsee must join with the payee of the check when seeking payment.

Question 19

Banks in the collection process that are not the depository or payer bank are called ________ banks.

Accepted Answer

A)  mediator 
B)  intermediary 
C)  secondary 
D)  tertiary 
E)  default

Question 20

Vicki has a checking account with Little Bank.She also has a debit card issued by Little Bank.Unfortunately,Vicki's purse and debit card are stolen when she leaves her purse in the car.Vicki realizes the theft has occurred,but is not too concerned because she took Business Law at the local community college,and seems to recall that her liability is limited to $50.As a result,she does nothing until she gets her bank statement 25 days later and sees that there was an unauthorized use of the card for $400.She calls the bank 10 days after she gets her bank statement and tells them about the purse- snatching.They refuse to credit her with the $400.Assume the Electronic Fund Transfer Act governs.Which of the following is true?

Accepted Answer

A)  Vicki will have to pay the $400, because she should have notified the bank of the theft within ten days of the purse snatching. 
B)  Vicki will have to pay the $400, because she should have notified the bank within two days of the purse snatching. 
C)  Vicki would have to pay the $400, regardless of when she notified the bank of the purse snatching. 
D)  Vicki does not have to pay the $400, because liability on a debit card is always limited to $50. 
E)  Vicki does not have to pay anything, because when a theft is involved, the customer owes nothing.

Exam 22: Banking System, E-Money, and Financial Reform

An oral stop-payment order is effective for seven days.

Article 4 of the Uniform Commercial Code establishes the requirements for negotiable instruments.

Assuming the bank has proper notice,which of the following situations would not allow the bank to rightfully dishonor a check?

Why does the law generally place the risk of forgery on the payor bank,yet place the risk of unauthorized completion on the drawer? What factors would justify a difference in liability of the bank? What factors would justify a difference in liability of the drawer?

When a bank wrongfully dishonors a check,both the drawer and the payee can recover reasonable damages from the bank.

When a bank has wrongfully dishonored a check,the payee can:

Bank checks are usually considered "as good as cash" because the bank is solely or primarily liable for payment.

Which of the following is true?

When a drawee bank is presented with a check drawn on a customer's account in which there are not sufficient funds to pay the check,the bank:

The collection process is governed by Article 2 of the Uniform Commercial Code.

In connection with a checking account at a bank,what is an overdraft?

Why are there such rigid and short deadlines for banks to decide whether to pay items? Does the midnight deadline force banks into making payment decisions before they have adequate information?

The drawer's failure to report a forged or altered check to the bank within ________ of receiving the bank statement and canceled checks containing it relieves the bank of any liability for paying the instrument.

When a payee or holder receives a check,he or she can either go to the payer bank and present the check for payment in cash,or deposit the check into the depository bank.

A bank cannot pay a drawer's check if sufficient funds are not in the drawer's account,unless prior arrangements,such as an overdraft protection line of credit,have been made.

Which of the following is characteristic of both cashier's checks and traveler's checks?

When the payee of a check indorses a check to another person (the indorsee) ,what is true about the indorsee?

Banks in the collection process that are not the depository or payer bank are called ________ banks.