Question 1

Fiona writes a check "pay to the order of Gerri" drawn on Fiona's account at Hearthstone Bank. Gerri presents the check for payment to Hearthstone,which accepts it. Primarily liable on the check is

Accepted Answer

A)  Fiona.
B)  Gerri.
C)  Hearthstone.
D)  none of the choices. C

Question 2

Lenora signs a note "payable to the order of Medical Account Collection Agency." Unless Lenora has a valid defense against payment,Lenora's liability on this note is

Accepted Answer

A)  immediate.
B)  imposed only after payment is demanded.
C)  postponed until the note is dishonored by the payee.
D)  suspended until payment is due. A

Question 3

Fanny signs a note "payable to the order of Guaranty Bank." Guaranty indorses the note in blank and negotiates it to Haji,who sells it to Iona. Liability associated with the transfer of the note from Haji to Iona is

Accepted Answer

A)  conceptual.
B)  contractual.
C)  signature.
D)  warranty. D

Question 4

To be negotiable,an instrument must be payable in money.

Accepted Answer

A) True 
 B)False

Question 5

Warranty liability arises only from a transferor's signature.

Accepted Answer

A) True 
 B)False

Question 6

Gwen deposits $5,000 with Home State Bank on July 1,2016. Home State Bank promises to repay Gwen the $5,000 plus 3 percent annual interest on July 1,2021. Home State Bank issued to Gwen

Accepted Answer

A)  acertificate of deposit.
B)  a check.
C)  anonnegotiable instrument.
D)  a trade acceptance.

Question 7

Any irregularity on the face of an instrument that calls into question its validity will bar HDC status.

Accepted Answer

A) True 
 B)False

Question 8

Lindsey,an accountant for Madison & Monroe,acquires a negotiable instrument from Norma by promising to pay its face value in thirty days. Lindsey acquires the status of an HDC when she

Accepted Answer

A)  acquires possession of the negotiable instrument.
B)  promises to pay the face value due on the instrument.
C)  pays the face value due on the instrument.
D)  transfers the instrument to another party.

Question 9

A check is a time instrument because it is payable in due time.

Accepted Answer

A) True 
 B)False

Question 10

Lewis makes a note payable to Milly. She indorses the back of the note and negotiates it to Negotiable Investments,Inc. Primarily liable on the note is

Accepted Answer

A)  none of the choices.
B)  Milly.
C)  Negotiable Investments.
D)  Lewis.

Question 11

Thalia signs an instrument unconditionally promising to pay to "Union Bank" $7500 with interest in installments with the final payment due June 1,2017.
-Refer to Fact Pattern 23-3. The instrument that Thalia signed is most likely

Accepted Answer

A)  a certificate of deposit.
B)  a draft.
C)  an order to pay.
D)  a promissory note.

Question 12

Erin draws a check payable to "Foodland" to buy groceries.
-Refer to Fact Pattern 23-1. With respect to Erin's check,Foodland is

Accepted Answer

A)  thedrawee.
B)  thedrawer.
C)  themaker.
D)  the payee.

Question 13

Pedro signs an instrument that states it is being executed "as per a contract for the sale of a case of apples dated May 1." This instrument is

Accepted Answer

A)  negotiable.
B)  notnegotiable,because banks cannot easily process commodities.
C)  notnegotiable,because it includes the specific date of a contract.
D)  notnegotiable,because it refers to an express contract.

Question 14

Raul wants to transfer a check to Schmidt. The check is defective if it

Accepted Answer

A)  has been previously dishonored.
B)  contains handwritten terms.
C)  is undated,antedated,or postdated.
D)  all of the choices.

Question 15

Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

Accepted Answer

A) True 
 B)False

Question 16

A symbol can serve as a valid signature.

Accepted Answer

A) True 
 B)False

Question 17

Daria writes a check to Education Loan Management,Inc.,that is drawn on Daria's account at First Federal Bank. If the bank does not accept the check,liability for its amount is on

Accepted Answer

A)  Daria.
B)  Education Loan Management.
C)  First Federal Bank.
D)  no one.

Question 18

A negotiable instrument can only be transferred by negotiation.

Accepted Answer

A) True 
 B)False

Question 19

With respect to negotiability,a mere reference to another writing or record makes a promise conditional.

Accepted Answer

A) True 
 B)False

Question 20

O'Malley negotiates an order instrument to Phil by

Accepted Answer

A)  anassignment of O'Malley's rights under a contract.
B)  adelivery to Phil with any necessary indorsement.
C)  making an unconditional promise to pay.
D)  presenting it in response to a demand by Phil.

Exam 23: Negotiable Instruments

Fiona writes a check "pay to the order of Gerri" drawn on Fiona's account at Hearthstone Bank. Gerri presents the check for payment to Hearthstone,which accepts it. Primarily liable on the check is

Lenora signs a note "payable to the order of Medical Account Collection Agency." Unless Lenora has a valid defense against payment,Lenora's liability on this note is

Fanny signs a note "payable to the order of Guaranty Bank." Guaranty indorses the note in blank and negotiates it to Haji,who sells it to Iona. Liability associated with the transfer of the note from Haji to Iona is

To be negotiable,an instrument must be payable in money.

Warranty liability arises only from a transferor's signature.

Gwen deposits $5,000 with Home State Bank on July 1,2016. Home State Bank promises to repay Gwen the $5,000 plus 3 percent annual interest on July 1,2021. Home State Bank issued to Gwen

Any irregularity on the face of an instrument that calls into question its validity will bar HDC status.

Lindsey,an accountant for Madison & Monroe,acquires a negotiable instrument from Norma by promising to pay its face value in thirty days. Lindsey acquires the status of an HDC when she

A check is a time instrument because it is payable in due time.

Lewis makes a note payable to Milly. She indorses the back of the note and negotiates it to Negotiable Investments,Inc. Primarily liable on the note is

Thalia signs an instrument unconditionally promising to pay to "Union Bank" $7500 with interest in installments with the final payment due June 1,2017. -Refer to Fact Pattern 23-3. The instrument that Thalia signed is most likely

Erin draws a check payable to "Foodland" to buy groceries. -Refer to Fact Pattern 23-1. With respect to Erin's check,Foodland is

Pedro signs an instrument that states it is being executed "as per a contract for the sale of a case of apples dated May 1." This instrument is

Raul wants to transfer a check to Schmidt. The check is defective if it

Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

A symbol can serve as a valid signature.

Daria writes a check to Education Loan Management,Inc.,that is drawn on Daria's account at First Federal Bank. If the bank does not accept the check,liability for its amount is on

A negotiable instrument can only be transferred by negotiation.

With respect to negotiability,a mere reference to another writing or record makes a promise conditional.

O'Malley negotiates an order instrument to Phil by