Question 1

When a draft guarantees payment for goods in international trade, the draft is called a:

Accepted Answer

A)   bill of trade
B)   bill of exchange
C)   bill of sale
D)   payment of exchange
E)   balloon note

Question 2

An acknowledgment by a bank that it has received money from a customer with a promise by the bank that it will repay the money received at a specified date is a note.

Accepted Answer

A) True 
 B)False

Question 3

The ____ of a note is the party who promises to pay another party.

Accepted Answer

A)   marketer
B)   payee
C)   financer
D)   payer
E)   none of the other choices are correct

Question 4

Under the UCC, a secured party may repossess property only if assisted by a sheriff or other law enforcement official.

Accepted Answer

A) True 
 B)False

Question 5

Refer to Fact Pattern 12-1. Assume that Gena pledges to Fidelity that if she is unable to meet her monthly repayment obligations the bank may take her pasta machines. They may be best described as:

Accepted Answer

A)   principal
B)   equity
C)   leveraged equity
D)   collateral
E)   a guarantor

Question 6

In the Matter of Kmart Corp., where some creditors objected to the bankruptcy judge decision that "critical vendors" were to be paid first so that the store might stay in business, the appeals court held that the decision of the bankruptcy judge was:

Accepted Answer

A)   within the scope of judgment allowed in an effort to keep a business functioning
B)   proper because the critical vendors were the secured creditors with preference
C)   proper so long as the proceeds of future sales were dedicated to non-critical vendors
D)   improper because of evidence of fraud in dealings by Kmart executives with vendors
E)   none of the other choices

Question 7

A check must have ____ as its drawee.

Accepted Answer

A)   a court
B)   an individual
C)   a corporation
D)   an international backer
E)   none of the other choices are correct

Question 8

In most states a mortgage on real estate is a lien.

Accepted Answer

A) True 
 B)False

Question 9

A creditor is one who lends money to, or allows goods or services to be purchased on credit by, another party, the:

Accepted Answer

A)   payee
B)   recipient
C)   debtee
D)   financer
E)   none of the other choices are correct

Question 10

Julia is buying a house from Mary. Mary wants to ensure that the bank will honor the check Julia uses to buy the house so she will probably insist that Julia pay with a:

Accepted Answer

A)   real check
B)   cashier's check
C)   personal check
D)   deposit slip
E)   cashier's note

Question 11

To raise needed capital, small companies most often rely on:

Accepted Answer

A)   currency exchanges
B)   commodities markets
C)   debt financing
D)   equity financing
E)   derivative financing

Question 12

Under Article 3 of the UCC, a draft is:

Accepted Answer

A)   an unconditional written order to pay that involves three parties: drawer, drawee, payee; the drawee may be a bank, person, or business; payment may be set at a future time
B)   an unconditional written order to pay that involves three distinct parties: drawer, drawee, and payee; the drawee must be a bank; payment must be "on demand"
C)   a promise by one party to pay a certain sum of money to another party; two parties are involved: the maker and the payee; payment may be set at some time in the future
D)   an acknowledgment by a bank that it has received money from a customer with a promise from the bank that it will repay the money received at a specified date or upon demand; two parties are involved: a maker and a payee
E)   none of the other choices

Question 13

The creditor on a mortgage is known as:

Accepted Answer

A)   the bank
B)   the debtee
C)   the mortgagor
D)   the mortgagee
E)   none of the other choices

Question 14

A form of check in which the bank is both the drawer and the drawee is called a:

Accepted Answer

A)   real check
B)   bank check
C)   cashier's note
D)   credit check
E)   none of the other choices are correct

Question 15

A ____ is a form of check in which the bank is both the drawer and the drawee.

Accepted Answer

A)   real check
B)   bank check
C)   cashier's note
D)   credit check
E)   none of the other choices are correct

Question 16

The law concerning liens is primarily:

Accepted Answer

A)   federal common law
B)   federal regulatory law
C)   federal statutory law
D)   administrative law
E)   none of the other choices

Question 17

To create a legally valid security interest, a business must ensure that the interest is:

Accepted Answer

A)   exposed
B)   debated
C)   united
D)   detached
E)   none of the other choices

Question 18

The final stage of bankruptcy is the dissolution stage.

Accepted Answer

A) True 
 B)False

Question 19

Under a Chapter 13 proceeding, debts must be repaid usually:

Accepted Answer

A)   within one year
B)   within three years
C)   within five years
D)   as soon "as practically possible"
E)   none of the other choices; all debts are liquidated

Question 20

Tiny borrows $20,000 from First Bank. Mike is the surety on the loan. Tiny defaults and First Bank requires Mike to pay the balance of the loan. In this case, Mike may sue:

Accepted Answer

A)   First for violating its guarantor obligations
B)   First for defrauding him
C)   Tiny to reimburse or exonerate him
D)   Tiny to enslave himself to Mike
E)   First to exonerate him

Exam 13: Negotiable Instruments, Credit, and Bankruptcy

Under the UCC, a secured party may repossess property only if assisted by a sheriff or other law enforcement official.

Correct AnswerverifiedShow Answer

When a draft guarantees payment for goods in international trade, the draft is called a:

Correct AnswerverifiedShow Answer

Under Article 3 of the UCC, a draft is:

Correct AnswerverifiedShow Answer

The final stage of bankruptcy is the dissolution stage.

Correct AnswerverifiedShow Answer

An acknowledgment by a bank that it has received money from a customer with a promise by the bank that it will repay the money received at a specified date is a note.

Correct AnswerverifiedShow Answer

A check must have ____ as its drawee.

Correct AnswerverifiedShow Answer

Under a Chapter 13 proceeding, debts must be repaid usually:

Correct AnswerverifiedShow Answer

A creditor is one who lends money to, or allows goods or services to be purchased on credit by, another party, the:

Correct AnswerverifiedShow Answer

The law concerning liens is primarily:

Correct AnswerverifiedShow Answer

In most states a mortgage on real estate is a lien.

Correct AnswerverifiedShow Answer

Tiny borrows $20,000 from First Bank. Mike is the surety on the loan. Tiny defaults and First Bank requires Mike to pay the balance of the loan. In this case, Mike may sue:

Correct AnswerverifiedShow Answer

A ____ is a form of check in which the bank is both the drawer and the drawee.

Correct AnswerverifiedShow Answer

Refer to Fact Pattern 12-1. Assume that Gena pledges to Fidelity that if she is unable to meet her monthly repayment obligations the bank may take her pasta machines. They may be best described as:

Correct AnswerverifiedShow Answer

The ____ of a note is the party who promises to pay another party.

Correct AnswerverifiedShow Answer

To raise needed capital, small companies most often rely on:

Correct AnswerverifiedShow Answer

A form of check in which the bank is both the drawer and the drawee is called a:

Correct AnswerverifiedShow Answer

In the Matter of Kmart Corp., where some creditors objected to the bankruptcy judge decision that "critical vendors" were to be paid first so that the store might stay in business, the appeals court held that the decision of the bankruptcy judge was:

Correct AnswerverifiedShow Answer

Julia is buying a house from Mary. Mary wants to ensure that the bank will honor the check Julia uses to buy the house so she will probably insist that Julia pay with a:

Correct AnswerverifiedShow Answer

To create a legally valid security interest, a business must ensure that the interest is:

Correct AnswerverifiedShow Answer

The creditor on a mortgage is known as:

Correct AnswerverifiedShow Answer

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