Question 1

When a bank draws a check on itself, the check is a negotiable instrument at the moment it is issued.

Accepted Answer

A) True 
 B)False

Question 2

The death of a customer automatically revokes a bank's authority to accept, pay, or collect an item drawn by the customer on an account with the bank.

Accepted Answer

A) True 
 B)False

Question 3

Payments via phones and other mobile devices represent the most common type of negotiable instrument regulated by the Uniform Commercial Code.

Accepted Answer

A) True 
 B)False

Question 4

A check may fall under Uniform Commercial Code Article 3 as a negotiable instrument and be subject to UCC Article 4 in the course of collection.

Accepted Answer

A) True 
 B)False

Question 5

Ruth takes her car to Service Center, which repairs the car and bills her for $500. She writes out a check drawn on Tempo Bank, but later, believing that Service Center did not fix the car properly, issues a stop-payment order. If Tempo pays the check, the bank

Accepted Answer

A) can sue Ruth for a wrongful stop-payment order. 
B) can sue Service Center for breach of contract. 
C) is liable to Service Center for the time and trouble to return the payment. 
D) is liable for Ruth's loss due to the wrongful payment.

Question 6

Rhea writes a check for $100 drawn on Savers Credit Union and presents it to Timpani Jewelers for payment. If the check is not backed by sufficient funds, Rhea may be prosecuted for

Accepted Answer

A) forgery. 
B) fraud. 
C) negligence. 
D) all of the choices.

Question 7

If only a bank's drive-through facility is open, a check deposited on Saturday will not trigger the bank's midnight deadline until the following Monday.

Accepted Answer

A) True 
 B)False

Question 8

Curt issues a check payable to Discount Mart. Ethel, Discount's cashier, forges the store's indorsement and deposits the check in her bank account. Curt's bank, Farmers Bank, pays the check. Curt can recover from

Accepted Answer

A) Ethel, but not the bank. 
B) the bank, which cannot recover from Ethel. 
C) the bank, which can recover from Ethel. 
D) neither Ethel nor the bank.

Question 9

If a bank's payment over a stop-payment order causes subsequent checks written on the drawer's account to be returned for insufficient funds, the bank will be liable for the drawer's resulting costs.

Accepted Answer

A) True 
 B)False

Question 10

Finance Bank receives a check drawn on the account of Enterprise Inc., one of the bank's customers, at 3 P.M. Friday. Dora, the presenter of the check, is not one of the bank's customers. The bank uses deferred posting with a 2 P.M. cutoff hour. If it decides to dishonor the check, it must do so by midnight

Accepted Answer

A) Saturday. 
B) Sunday. 
C) Monday. 
D) Tuesday.

Question 11

Electronic banking has reduced the number of possibilities for tampering with a person's private banking information.

Accepted Answer

A) True 
 B)False

Question 12

Faye forges Greta's signature on a check "payable to the order of Faye" drawn on Greta's account at Home Bank. Most likely, if the bank pays the check

Accepted Answer

A) the Federal Reserve will reimburse all parties for their costs. 
B) the loss will be apportioned among all of the bank's customers. 
C) Greta will be liable for the amount. 
D) the bank will have to recredit Greta's account.

Question 13

Corky pays Delta Bank $500 plus a service fee to draw a check on itself payable to Electric Company. The party responsible for paying the check is

Accepted Answer

A) Corky only. 
B) Corky and Delta Bank. 
C) Delta Bank only. 
D) Corky, Delta Bank, and Electric Company.

Question 14

Chad writes Dina an uncertified check for $500 drawn on Chad's account at Employees Credit Union. Seven months later, Dina presents the check for payment. The credit union pays the check in good faith without consulting Chad. The credit union

Accepted Answer

A) cannot charge Chad's account for any amount. 
B) can charge Chad's account for $250 only. 
C) can charge Chad's account for $500. 
D) is liable for breach of contract.

Question 15

If a check is dishonored for insufficient funds, the bank on which the check is drawn is liable to the payee or to the holder in a civil suit.

Accepted Answer

A) True 
 B)False

Question 16

Riley signs a check "pay to the order of State University" drawn on his account at Town Bank to pay tuition and fees. Like most checks, this check is

Accepted Answer

A) actual cash. 
B) virtual cash. 
C) a special type of draft. 
D) a type of electronic fund transfer.

Question 17

A bank must re-credit a customer's account when the bank pays a check on which the drawer's signature is forged.

Accepted Answer

A) True 
 B)False

Question 18

Both stored-value cards and smart cards contain microchips with security programming that can authenticate the validity of a financial transaction.

Accepted Answer

A) True 
 B)False

Question 19

Even if a customer's negligence substantially contributes to a forgery of the drawer's signature on a check, the bank is obliged to re-credit the customer's account for the amount of the check.

Accepted Answer

A) True 
 B)False

Question 20

Because the speed of check-processing time is increasing, to avoid overdrafts, an account-holder needs to verify that funds are available to cover a check when it is written.

Accepted Answer

A) True 
 B)False

Exam 28: Banking

When a bank draws a check on itself, the check is a negotiable instrument at the moment it is issued.

The death of a customer automatically revokes a bank's authority to accept, pay, or collect an item drawn by the customer on an account with the bank.

Payments via phones and other mobile devices represent the most common type of negotiable instrument regulated by the Uniform Commercial Code.

A check may fall under Uniform Commercial Code Article 3 as a negotiable instrument and be subject to UCC Article 4 in the course of collection.

Ruth takes her car to Service Center, which repairs the car and bills her for $500. She writes out a check drawn on Tempo Bank, but later, believing that Service Center did not fix the car properly, issues a stop-payment order. If Tempo pays the check, the bank

Rhea writes a check for $100 drawn on Savers Credit Union and presents it to Timpani Jewelers for payment. If the check is not backed by sufficient funds, Rhea may be prosecuted for

If only a bank's drive-through facility is open, a check deposited on Saturday will not trigger the bank's midnight deadline until the following Monday.

Curt issues a check payable to Discount Mart. Ethel, Discount's cashier, forges the store's indorsement and deposits the check in her bank account. Curt's bank, Farmers Bank, pays the check. Curt can recover from

If a bank's payment over a stop-payment order causes subsequent checks written on the drawer's account to be returned for insufficient funds, the bank will be liable for the drawer's resulting costs.

Electronic banking has reduced the number of possibilities for tampering with a person's private banking information.

Faye forges Greta's signature on a check "payable to the order of Faye" drawn on Greta's account at Home Bank. Most likely, if the bank pays the check

Corky pays Delta Bank $500 plus a service fee to draw a check on itself payable to Electric Company. The party responsible for paying the check is

Chad writes Dina an uncertified check for $500 drawn on Chad's account at Employees Credit Union. Seven months later, Dina presents the check for payment. The credit union pays the check in good faith without consulting Chad. The credit union

If a check is dishonored for insufficient funds, the bank on which the check is drawn is liable to the payee or to the holder in a civil suit.

Riley signs a check "pay to the order of State University" drawn on his account at Town Bank to pay tuition and fees. Like most checks, this check is

A bank must re-credit a customer's account when the bank pays a check on which the drawer's signature is forged.

Both stored-value cards and smart cards contain microchips with security programming that can authenticate the validity of a financial transaction.

Even if a customer's negligence substantially contributes to a forgery of the drawer's signature on a check, the bank is obliged to re-credit the customer's account for the amount of the check.

Because the speed of check-processing time is increasing, to avoid overdrafts, an account-holder needs to verify that funds are available to cover a check when it is written.