Question 1

A check is not a demand instrument, because by definition a check is not payable for a period of time after its issue.

Accepted Answer

A) True 
 B)False

Question 2

A promissory note signed to obtain a student loan is a negotiable instrument that functions as an extension of credit.

Accepted Answer

A) True 
 B)False

Question 3

Fern has six nieces, ages five to sixteen. She writes an instrument for $50 that states, "Pay to the order of my niece." The instrument is

Accepted Answer

A)  negotiable.
B)  nonnegotiable, because the amount of money is less than $500.
C)  nonnegotiable, because it is illegal to write an order instrument payable to a relative.
D)  nonnegotiable, because there is no specific person identified.E) None of the above
F) A) and B)

Question 4

Special requirements for the form and content of negotiable instruments are imposed by

Accepted Answer

A)  the Lex Mercatoria as codified in England.
B)  the Uniform Commercial Code.
C)  none of the choices.
D)  rules developed by merchants in the medieval world.E) B) and C)
F) A) and C)

Question 5

On an instrument, a mere reference to another writing-"As per contract"- does not render the instrument nonnegotiable.

Accepted Answer

A) True 
 B)False

Question 6

A promise that states an express condition to payment is negotiable if the condition is stated in writing on the instrument.

Accepted Answer

A) True 
 B)False

Question 7

On the back of an envelope, Phoebe writes, "I promise to pay Quint or bearer $600 on demand. [Signed] Phoebe." What type of instrument is this? Is it negotiable? If not, why not?

Accepted Answer

This instrument is a promissory note and...

Question 8

If the numerical and written amounts on a check differ, the check is payable in the written amount.

Accepted Answer

A) True 
 B)False

Question 9

In an international sale of goods, Cielo SA, the buyer, and Drones Inc., the seller, use a banker's acceptance. Essentially, this instrument

Accepted Answer

A)  promises that the maker will pay a specified amount to another party.
B)  orders the buyer to pay a specified amount to the seller.
C)  orders the buyer's bank to pay a specified amount to the seller.
D)  acknowledges a deposit of funds payable to the holder.E) C) and D)
F) B) and C)

Question 10

Marin writes on a piece of paper, "I owe you $600," signs it, and gives it to Nye. This instrument is

Accepted Answer

A)  negotiable.
B)  nonnegotiable, because it does not include an express promise to pay.
C)  nonnegotiable, because it does not recite any consideration.
D)  nonnegotiable, because it does not state any conditions to payment.E) B) and C)
F) A) and D)

Question 11

The nature of an instrument, such as a check, may indicate that it is payable on demand.

Accepted Answer

A) True 
 B)False

Question 12

In response to an order for flour from Good Eating LLC, Harvest Mill creates a draft ordering Good to pay Harvest for the flour within sixty days and sends it with the delivery to Good. On receipt, the buyer signs the draft. On this instrument, Harvest is

Accepted Answer

A)  neither the drawer nor the payee.
B)  only the payee.
C)  only the drawer.
D)  both the drawer and the payee.E) B) and D)
F) A) and B)

Question 13

Fresh Fruit Company accepts a check from Grocers Mart in payment on a shipment of apples, but Harvest Meat LLC will not accept a check for a beef order. Fewer checks are written today because

Accepted Answer

A)  most transactions are electronic.
B)  promissory notes have replaced checks as costs have risen.
C)  the use of credit has become more widespread.
D)  merchants are increasingly refusing to accept cash and checks.E) All of the above
F) A) and B)

Question 14

Wen writes an instrument that states it is "payable to X." The instrument is

Accepted Answer

A)  negotiable.
B)  nonnegotiable, because it does not state that it is payable to order.
C)  nonnegotiable, because it is payable to a nonexistent person.
D)  nonnegotiable, because it cannot be transferred by indorsement.E) A) and D)
F) A) and C)

Question 15

Tree Nursery signs an instrument that states with certainty a fixed amount to be paid at the time the instrument is payable. Fixed amount means that the amount must be

Accepted Answer

A)  stated as a fixed, not a variable, rate.
B)  ascertainable from the face of the instrument.
C)  determinable before the time it is payable.
D)  all of the choices.E) All of the above
F) C) and D)

Question 16

An instrument is not negotiable unless it is "payable to order or to bearer" at the time it is issued or first comes into the possession of a holder.

Accepted Answer

A) True 
 B)False

Question 17

In a domestic sale of goods, Boxes LLC, the seller, and Containers Inc., the buyer, use a trade acceptance. Essentially, this instrument

Accepted Answer

A)  promises that the maker will pay a specified amount to another party.
B)  orders the buyer to pay a specified amount to the seller.
C)  orders the buyer's bank to pay a specified amount to the seller.
D)  acknowledges a deposit of funds payable to the holder.E) A) and C)
F) A) and B)

Question 18

Because negotiable instruments were originally paper documents, they are sometimes referred to as a commercial paper.

Accepted Answer

A) True 
 B)False

Question 19

When a note is lost, impaired, or destroyed, the owner loses the right to be paid its value, even if its existence can be proved with a copy.

Accepted Answer

A) True 
 B)False

Question 20

Edie deposits funds with First National Bank, which issues an instrument that promises to repay the funds, with interest, on a certain date. Before the maturity date, Edie wants to access the funds. Edie can

Accepted Answer

A)  submit the instrument to the maker for immediate payment.
B)  withdraw the funds before the date of maturity.
C)  advance the date for repayment.
D)  sell the instrument to a third party.E) A) and B)
F) B) and D)

Exam 25: Negotiable Instruments

The nature of an instrument, such as a check, may indicate that it is payable on demand.

Correct AnswerverifiedShow Answer

In a domestic sale of goods, Boxes LLC, the seller, and Containers Inc., the buyer, use a trade acceptance. Essentially, this instrument

Correct AnswerverifiedShow Answer

An instrument is not negotiable unless it is "payable to order or to bearer" at the time it is issued or first comes into the possession of a holder.

Correct AnswerverifiedShow Answer

Because negotiable instruments were originally paper documents, they are sometimes referred to as a commercial paper.

Correct AnswerverifiedShow Answer

A promise that states an express condition to payment is negotiable if the condition is stated in writing on the instrument.

Correct AnswerverifiedShow Answer

Wen writes an instrument that states it is "payable to X." The instrument is

Correct AnswerverifiedShow Answer

When a note is lost, impaired, or destroyed, the owner loses the right to be paid its value, even if its existence can be proved with a copy.

Correct AnswerverifiedShow Answer

A check is not a demand instrument, because by definition a check is not payable for a period of time after its issue.

Correct AnswerverifiedShow Answer

Special requirements for the form and content of negotiable instruments are imposed by

Correct AnswerverifiedShow Answer

In response to an order for flour from Good Eating LLC, Harvest Mill creates a draft ordering Good to pay Harvest for the flour within sixty days and sends it with the delivery to Good. On receipt, the buyer signs the draft. On this instrument, Harvest is

Correct AnswerverifiedShow Answer

In an international sale of goods, Cielo SA, the buyer, and Drones Inc., the seller, use a banker's acceptance. Essentially, this instrument

Correct AnswerverifiedShow Answer

Tree Nursery signs an instrument that states with certainty a fixed amount to be paid at the time the instrument is payable. Fixed amount means that the amount must be

Correct AnswerverifiedShow Answer

On an instrument, a mere reference to another writing-"As per contract"- does not render the instrument nonnegotiable.

Correct AnswerverifiedShow Answer

Fresh Fruit Company accepts a check from Grocers Mart in payment on a shipment of apples, but Harvest Meat LLC will not accept a check for a beef order. Fewer checks are written today because

Correct AnswerverifiedShow Answer

A promissory note signed to obtain a student loan is a negotiable instrument that functions as an extension of credit.

Correct AnswerverifiedShow Answer

Marin writes on a piece of paper, "I owe you $600," signs it, and gives it to Nye. This instrument is

Correct AnswerverifiedShow Answer

Edie deposits funds with First National Bank, which issues an instrument that promises to repay the funds, with interest, on a certain date. Before the maturity date, Edie wants to access the funds. Edie can

Correct AnswerverifiedShow Answer

On the back of an envelope, Phoebe writes, "I promise to pay Quint or bearer $600 on demand. [Signed] Phoebe." What type of instrument is this? Is it negotiable? If not, why not?

Correct AnswerverifiedThis instrument is a promissory note and...View AnswerShow Answer

If the numerical and written amounts on a check differ, the check is payable in the written amount.

Correct AnswerverifiedShow Answer

Fern has six nieces, ages five to sixteen. She writes an instrument for $50 that states, "Pay to the order of my niece." The instrument is

Correct AnswerverifiedShow Answer

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This instrument is a promissory note and...
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