Chapter 22 Quiz

Article​ _________ of the​ ________ establishes rules for the creation​ of, transfer​ of, enforcement​ of, and liability on negotiable instruments.

• ​3; Interstate Commerce Code
• ​2; Interstate Commerce Code
• ​2(A); Uniform Contracts Code
• ​3; Uniform Commercial Code
• ​3; Uniform Contracts Code

Which of the following is an INCORRECT statement regarding the functions of negotiable​ instruments?

• Certain forms of negotiable​ instruments, such as​ checks, serve as substitutes for money.
• As​ securities, negotiable instruments represent ownership in a corporation.
• Without negotiable​ instruments, the​ "credit economy" of the United States and other modern industrial countries would not be possible.
• Negotiable instruments often serve as​ record-keeping devices.
• Some forms of negotiable instruments extend credit from one party to another.

Suppose Mary owes Hector​ $1,000. Hector wants Mary to pay the money to Cindy instead of to him. Hector writes out a draft that orders Mary to pay the​ $1,000 to Cindy. Mary agrees to this change of obligation and writes the word​ "accepted" on the draft and signs the draft. Hector is the​ _____, Mary is the​ _____ and acceptor of the​ draft, and Cindy is the​ _____.

• ​drawee; drawer; payee
• ​drawer; drawee; payee
• ​drawer; payee; drawee
• ​payee; drawer; drawee
• ​payee; drawee; drawer

Justin has a checking account at Country Bank. When Justin purchases a car from​ Mary's Motors, a car​ dealership, Justin pays for the car by writing a check on the bank made payable to​ Mary's Motors. In this​ case, Justin is the​ _____, Country Bank is the​ _____, and​ Mary's Motors is the​ _____.

• ​drawer; payee; drawee
• ​payee; drawer; drawee
• ​drawee; drawer; payee
• ​drawee; payee; drawer
• ​drawer; drawee; payee

Andrew borrows​ $10,000 from Wei and signs a promissory note agreeing to pay Wei the principal and 10 percent annual interest over three years in equal monthly installments.​ Here, Andrew is the​ _____ of the​ note, and Wei is the​ _____.

• ​acceptor; drawee
• ​originator; drawee
• ​drawee; payee
• ​drawer; payee
• ​maker; payee

Millicent has​ $50,000 that she would like to invest and earn income on. Millicent goes into City Bank and deposits her money with the bank in exchange for a certificate of deposit​ (CD) that bears an annual interest rate of 7 percent.​ Here, City Bank is the​ _____ of the​ CD, and Millicent is the​ _____.

• ​drawer; payee
• ​originator; drawee
• ​maker; payee
• ​drawee; payee
• ​originator; acceptor

Bastion owes Federico​ $100 for the concert ticket that Federico purchased for him. Federico owes Delilah​ $100 because of a bet they made. If Federico writes on a piece of​ paper: "Bastion: Pay Delilah​ $100" and signs​ it, this would be considered a​ _____.

• nonnegotiable instrument
• certificate of deposit
• check
• promissory note
• draft

Bastion borrows money from Federico to purchase a car. Federico has Bastion sign a piece of paper indicating his agreement to pay the amount owing to Federico for the loan. This would be considered a​ _____.

• check
• promissory note
• certificate of deposit
• draft
• nonnegotiable instrument

Bastion has a bank account with Seventh Third Bank. To pay Federico for concert tickets Federico​ purchased, Bastion writes a​ _____ that can be presented to the Seventh Third Bank by Federico for payment.

• nonnegotiable instrument
• promissory note
• bearer instrument
• certificate of deposit
• check

Bastion has a bank account with Seventh Third Bank and would like to invest some money. Bastion gives the bank​ $1,000 in exchange for a​ _____ that bears an annual interest rate of 2.1 percent payable in one year.

• promissory note
• check
• bearer instrument
• certificate of deposit
• nonnegotiable instrument