AC 312 Exam 2

Sear Enterprises wants to continue in business, but needs some relief from creditors' claims. Sear Enterprises should consider filing under Chapter ____________ of the Bankruptcy Code. a. 7 b. 11 c. 12 d. 13

11

Iris is looking for a short-term mortgage that will allow her to pay fixed payments at a relatively low fixed interest rate during the life of the mortgage and one large payment at the end of the term. What kind of mortgage should Iris take? a. A balloon-payment mortgage b. A VA mortgage c. A conventional mortgage d. A graduated-payment mortgage

A balloon-payment mortgage

Through what kind of written instrument would Tim direct Howard to pay $600 to the order of Celeste? a. A certificate of deposit b. A note c. A draft d. A dishonored draft

A draft

Planter, Inc. sold $100,000 in plants and plant supplies to Ace Corporation. When the supplies were delivered to Ace, Ace ordered its bank, Fourth National, to pay $100,000 to Planter. Fourth National debited Ace's account and ordered Chase Superior, Planter's bank, to credit Planter's account for $100,000. In this transaction: a. Planter is the originator and Ace is the beneficiary. b. Ace is the originator and Chase Superior is the beneficiary. c. Ace is the originator and Planter is the beneficiary. d. Fourth National is the beneficiary and Chase Superior, the originator.

Ace is the originator and Planter is the beneficiary.

Stan commits securities fraud and takes $5,000,000 from a variety of investors. Stan is convicted of a crime and then sued by the investors. Stan files for bankruptcy. What relief will the bankruptcy filing grant Stan? a. Automatic stay on all cash advances paid to a creditor under an open-ended credit plan b. Automatic stay and discharge of any debt created with the securities fraud c. Automatic stay, but no discharge of any debt created by the securities fraud d. Automatic stay and discharge of all debts incurred

Automatic stay, but no discharge of any debt created by the securities fraud

Which of the following is true of a bad-check statute? a. The payee does not have the obligation of informing the drawer of the nonpayment of the check. b. Bad-check statutes are effectively used as a means of collection. c. The payee can prosecute the drawer immediately after being notified of a bad check by the drawee bank. d. The drawee bank can prosecute the payee in case of dishonor of a check.

Bad-check statutes are effectively used as a means of collection.

Carl finds a lost dog and returns it to its owner, Betty. Betty gives Carl a check for $50 for his efforts, but later stops payment on the check. Carl cashed the check at Cash-All-Checks, who now seeks to recover from Betty. Will Cash-All-Checks be successful? a. Betty has a real defense against Carl and Cash-All-Checks. b. Betty has no defense against Cash-All-Checks, hence the latter will be successful. c. Betty has a personal defense that allows Cash-All-Checks to be successful. d. Betty has a defense against Cash-All-Checks since the check is less than $100.

Betty has a personal defense that allows Cash-All-Checks to be successful.

Charles sold a house to Darla with Charles holding a recorded mortgage. Darla wants to sell the house and her purchaser, Cindi, obtains a financing commitment from Small Bank, provided Small Bank is able to hold a first mortgage on the house. How will Small Bank obtain the first mortgage? a. By paying off Darla's mortgage. b. Small Bank mortgages take priority over private mortgages. c. Charles may give oral consent that Small Bank will have priority. d. By paying off Charles' mortgage.

By paying off Charles' mortgage.

Joseph owes $15,000 to Carmel Enterprises, $8,500 to Vulcan Co., $11,000 to David and $11,500 to Sigma Enterprises. He has not been making payments on these debts for the past 20 months. Which of these creditors can force Joseph into involuntary bankruptcy? a. Carmel Enterprises only b. Carmel Enterprises and David only c. Carmel Enterprises, Sigma Enterprises, David, and Vulcan Co. d. Sigma Enterprises, David and Vulcan Co. only

Carmel Enterprises only

Vernon owns a family run farming business. He earned $100,000 in the current financial year. He owes $70,000 that he cannot pay. This debt forms a part of his farm expenses to creditors, but he wants to keep the business running. Which type bankruptcy should Vernon file for? a. Chapter 7 only b. Chapter 11 and Chapter 7 c. Chapter 7 and Chapter 12 d. Chapter 12

Chapter 12

Which chapter of the bankruptcy code allows a federal homestead exemption? a. Chapter 11 b. Chapter 7 c. Chapter 8 d. Chapter 12

Chapter 7

If Daphne gave value for and cashes Lisa's check, what legal rights, if any, does Daphne have? a. Daphne may insist upon an unqualified indorsement. b. Daphne may not insist upon any particular type of indorsement. c. Daphne may insist upon both an unqualified indorsement and a restrictive indorsement. d. Daphne may insist upon an unqualified, restrictive and special indorsement.

Daphne may insist upon an unqualified indorsement.

Which of the following is a duty vested in a trustee by the court, when the debtor is a business and files a Chapter 7 petition? a. He may be authorized to operate the business for a limited period of time. b. He may be authorized to make payments made by the debtor within 90 days before the filing of the petition c. He may be authorized to sell the debtor's properties and hand over the proceeds of the sales to the debtor. d. He may be authorized to pay off the debts according to the personal priority list.

He may be authorized to operate the business for a limited period of time.

Which of the following is true of a bank's duty to honor checks? a. The drawee bank is not under a duty to honor all checks drawn by its customers in presence of sufficient funds in the customers' accounts. b. If there are insufficient funds on deposit, the bank may charge the customer's account if it does not create an overdraft. c. If a bank fails to honor a check because of a mistake on its part, the bank is liable to the customer for damages the customer suffers. d. The drawee bank has a liability to the holder of the check, regardless of whether the check is certified.

If a bank fails to honor a check because of a mistake on its part, the bank is liable to the customer for damages the customer suffers.

Which of the following is true of using the defense of failure of consideration by a maker or drawer of an instrument? a. It can be used when the instrument is negotiated to a holder in due course. b. It can be used when no consideration exists in the underlying contract for which the instrument was issued. c. It can be used when one of the parties breaches the contract by not furnishing the agreed consideration. d. It can be used if a party, induced by a fraudulent statement to enter a contract, is the holder of a negotiable instrument issued as part of the transaction.

It can be used when one of the parties breaches the contract by not furnishing the agreed consideration.

Which of the following is true of conventional fixed-rate mortgages? a. It has a rate of interest that changes according to fluctuations in the index to which it is tied. b. It involves no government backing by either insurance or guarantee. c. It has a fixed interest rate during the life of the mortgage, where the monthly payments by mortgagor increase over the term of the loan. d. It has comparatively low fixed payments during the life of the mortgage, followed by one large final payment.

It involves no government backing by either insurance or guarantee.

Which of the following is true of coinsurance? a. It is rarely found in property insurance policies. b. It allows the insured to pay an extra premium initially in exchange for a guaranteed option to buy more insurance at certain specified times later. c. It excuses the insured from paying premiums if he or she becomes disabled. d. It is a provision under which the insurer and the insured share costs, after the deductible is met, according to a specific formula.

It is a provision under which the insurer and the insured share costs, after the deductible is met, according to a specific formula.

Which of the following is true of a foreign draft? a. It is drawn in one state and payable in another state. b. It is drawn in one nation and payable in another nation. c. It is drawn on one bank and payable to a governmental body. d. It is drawn in one city and payable in another city in the United States.

It is drawn in one nation and payable in another nation.

Thomas signed a blank promissory note and placed it on his office desk. Kelly, also present there, pilfered the note. The note ended up in the possession of Big Bank. What defense to payment does Thomas have? a. Contributory negligence b. Lack of delivery c. Failure of consideration d. Lack of possession

Lack of delivery

Which of the following provides a system in which debtors are forced to sell most of their property and use the cash to pay their creditors a portion of the amount owed each one? a. Family Farmer or Fishing Business Debt Adjustment b. Reorganization c. Liquidation d. Individual Debt Adjustment

Liquidation

Mark is mentally incompetent and delights in signing documents. Henry persuades Mark to sign numerous promissory notes which he negotiates. Must Mark pay these notes if they have been held by holders in due course? a. Mark must pay these notes since duress is not involved. b. Mark does not have to pay these notes since he has a real defense. c. Mark must pay these notes since there is a fraud in the inducement. d. Mark may not pay these notes since no one could anticipate this happening.

Mark does not have to pay these notes since he has a real defense.

Which of the following is true of real defenses? a. Real defenses can be used against holders, but not holders in due course. b. Anyone who has a real defense is required to pay an instrument. c. Real defenses can be used against everyone, including holders in due course. d. Real defenses include breach of contract, failure or lack of consideration, fraud in the inducement, and payment.

Real defenses can be used against everyone, including holders in due course.

Which of the following is true of recording a mortgage? a. A failure to record the first mortgage would remove the obligation of the mortgagor to the first mortgagee. b. The second mortgagee must know about the first mortgage and is exempted to record the mortgage. c. If the mortgage is not recorded and a later mortgage is given on the same property, the old mortgage is superior to the second. d. Recording a mortgage notifies any third party that the mortgagee has an interest in the real property covered by the mortgage.

Recording a mortgage notifies any third party that the mortgagee has an interest in the real property covered by the mortgage.

In which type of mortgage is the loan repaid when the borrower dies or the property is sold? a. Variable-rate mortgage b. Conventional mortgage c. Balloon-payment mortgage d. Reverse mortgage

Reverse mortgage

Brianna repaid a $600 loan to her friend, Sharkey. She made the check payable jointly to Sharkey and Sharkey's daughter, Evie, even though she intended Sharkey to have the entire interest in the repaid debt. a. Sharkey can legally forge Evie's indorsement as Brianna did not intend Evie to have any interest. b. Sharkey cannot cash the check unless Evie indorses it herself. c. If Sharkey forges Evie's indorsement, he can be held liable for the tort of conversion. d. If Sharkey cashes the check with Evie's indorsement, he is legally obligated to give her half of the payment.

Sharkey can legally forge Evie's indorsement as Brianna did not intend Evie to have any interest.

Ted gave Stanley a $300 negotiable note for repairs to his car. Stanley did not do the repairs, but indorsed the note to Nami who did not know of Stanley's lack of work and paid Stanley for its note. Nami gave the note to her daughter, Sopan, for Christmas and Sopan attempted to collect the note. What is Sopan's legal status? a. Sopan is not a holder in due course, but has the rights of a holder in due course b. Sopan is not a holder in due course and has no rights of a holder in due course. c. Sopan is not a holder in due course, but does qualify as a holder in gift status d. Sopan has no rights, since she did not give consideration.

Sopan is not a holder in due course, but has the rights of a holder in due course

What type of insurance policy requires the payment of premiums throughout the life of the insured and pays the beneficiary the face value of the policy upon the insured's death? a. Limited-payment life insurance b. Universal life insurance c. Straight life insurance d. Term life insruance

Straight life insurance

Under Chapter 13 of the Bankruptcy Code, what happens if the debtor submits the repayment plan to the court, but the court has yet to hold its hearing? a. The debtor is not required to start payments within the stipulated period of thirty days. b. The debtor makes the payments to the trustee. c. The debtor makes payments individually to the creditors. d. The debts of the debtor are discharged.

The debtor makes the payments to the trustee.

According to Chapter 13 of the Bankruptcy Code, which of the following statements is correct? a. The debtor should be able to pay the entire amount they owe to each creditor. b. Involuntary filings are permitted. c. The debtor must have an already established steady income. d. Corporations and partnerships can file.

The debtor must have an already established steady income.

Which of the following is true of the relationship between the drawee bank and its customer? a. The drawee bank becomes a creditor and the customer becomes a debtor at the time of opening a checking account. b. The drawee bank becomes an insurer and the customer the insured at the time of opening a checking account. c. The drawee bank becomes the customer's debtor at the time of opening a checking account and agent while collecting checks. d. The drawee bank becomes a debtor to the customer when the bank pays more than the customer has on deposit.

The drawee bank becomes the customer's debtor at the time of opening a checking account and agent while collecting checks.

Which of the following is true of warranties by indorsers? a. The indorser is not entitled to enforce the instrument. b. The indorser warrants that the instrument is subject to a defense of any party that can be asserted against the indorser. c. The indorser warrants that he or she has knowledge of the bankruptcy of the maker, acceptor, or drawer. d. The indorser warrants that there has been no alteration or other irregularity.

The indorser warrants that there has been no alteration or other irregularity.

Lucia had a homeowner's insurance policy on her house. While she was away on vacation, her porch got burned to the ground. After the fire, her house was burglarized and goods worth thousands of dollars were stolen from it. When Lucia arrived home, she called the police. While a police officer was interviewing her in her dining room, a chandelier fell on him and knocked him unconscious. Which losses will Lucia's homeowner's policy cover? a. The losses due to theft and the injuries sustained by the officer, but not the losses incurred by the fire. b. The losses due to fire and the injuries sustained by the officer, but not the losses incurred by theft. c. The losses incurred due to fire and theft, but not the injuries suffered by the police officer while on her property. d. The losses incurred due to fire and theft as well as the injuries suffered by the police officer while on her property.

The losses incurred due to fire and theft as well as the injuries suffered by the police officer while on her property.

Jodie deposits a $527 check from the IRS made payable to her in her checking account. When will the $527 be made available to her? a. Within seven business days of the date of her deposit b. Within three business days of the date of her deposit c. Within ten business days of the date of her deposit d. The next business day following the date of her deposit

The next business day following the date of her deposit

Which of these is true regarding "failure of consideration" and "lack of consideration"? a. They are real defenses which can be used against holders in due course. b. Failure of consideration is a real defense and lack of consideration is a personal defense. c. Failure of consideration is a personal defense and lack of consideration is a real defense. d. They are personal defenses which cannot be used against holders in due course.

They are personal defenses which cannot be used against holders in due course.

Under the 2005 Bankruptcy Act, debtors are required to meet which of the following conditions file for Chapter 7 bankruptcy? a. They must provide a federal income tax return for the most recent tax year. b. Their income should be more than the state median income. c. They must be involved in a fishing or farming business. d. They should be commodity brokers or stock brokers.

They must provide a federal income tax return for the most recent tax year.

Carol borrows $50,000 to purchase seven industrial Xerox copying machines, and open up her own copy shop. The bank loan requires that Carol grant the bank a security interest in any property acquired after the original agreement is signed. After she shows the loan letter to Xerox, it agrees to sell her the copiers for $80,000 to be paid over five years. Who has priority in the copying machines? a. The bank, if it filed and perfected its interest first b. The bank because of the "floating lien" loan agreement c. Xerox, if it filed the loan agreement before the bank did d. Xerox, because this is a purchase money security interest

Xerox, because this is a purchase money security interest

Personal defenses are defenses that can be used against: a. natural persons, but not corporations. b. a holder in due course of a negotiable instrument, but not a holder. c. a holder, but not a holder in due course of a negotiable instrument. d. any party with whom the holder in due course has dealt with.

a holder, but not a holder in due course of a negotiable instrument.

According to the UCC, conflicting secured interests are generally resolved: a. according to whether an attached security interest in inventory has priority over a conflicting security interest in the same inventory. b. by consumers' perfected security interests of which they have no knowledge. c. based on whether the seller's inventory prevails over buyers of goods in the ordinary course of business (except farm products). d. according to priority in time of filing or perfection.

according to priority in time of filing or perfection.

The insurance company's liability under comprehensive coverage is limited to the ____________ of the vehicle at the time of the loss. a. actual cash value b. outstanding loan value c. replacement value d. stated value

actual cash value

In 1978, Chapters 11 and 13 of the Bankruptcy Code were created, which: a. made it easier for creditors to obtain bankruptcy relief. b. allowed businesses and individuals to reorganize and keep going. c. made it more difficult to declare bankruptcy. d. allowed creditors to keep all of the debtor's assets.

allowed businesses and individuals to reorganize and keep going.

Tom gave celebrity Lynnetta Landau a blank sheet of paper and asked her to sign her autograph on it. Then, without Lynetta's knowledge, Tom wrote a promissory note made payable to him for $3,000 above her signature. This kind of fraud is known as fraud: a. as to the essential nature of the transaction, which may not be used as a defense against a holder in due course. b. as to the essential nature of the transaction, which may be used as a defense against a holder in due course. c. in the inducement, which may not be used as a defense against a holder in due course. d. in the inducement, which may be used as a defense against a holder in due course.

as to the essential nature of the transaction, which may be used as a defense against a holder in due course.

A(n) ____________ occurs when the ____________. a. attachment; secured party does not sign a security agreement b. securitization; debtor has no ownership rights in the collateral c. attachment; secured party transfers something of value to the debtor d. floating lien; secured party gives possession of the collateral

attachment; secured party transfers something of value to the debtor

A(n) __________ stops the debtor's creditors from making further moves to collect the money that the debtor owes them. a. restraining order b. waiver c. automatic stay d. order for relief e. bankruptcy officer

automatic stay

A(n) ____________ is a self-operating postponement of collection proceedings against the debtor, which goes into effect the moment the order for relief occurs. a. federal exemption b. involuntary petition c. automatic stay d. means test

automatic stay

Historically, when merchants bought goods, instead of paying for them with gold or silver, they simply filled in a piece of paper called a ____________ which ordered the goldsmith or silversmith to give a certain amount of the precious metal to the person who sold the goods. a. demand note b. promissory note c. bill of exchange d. certificate of deposit

bill of exchange

A(n) ____________ will provide temporary insurance coverage until the policy is formally accepted. a. premium b. adhesion contract c. warranty d. binder

binder

When one of the parties to a contract has failed to do what he or she has previously agreed to do, it is a: a. fraud in the inducement b. failure of consideration c. breach of contract d. lack of delivery

breach of contract

Industries Inc. drew a check payable to "Gloria Schell and Pippen Tallit" in the sum of $20,000. For a proper negotiation, the check needs to be indorsed: a. only by Gloria Schell, since her name appears first. b. by either payee, since the indorsement of only one of the payees is necessary to negotiate the check. c. by both payees d. by the maker

by both payees

A holder in due course of a negotiable instrument: a. can receive more rights than the previous holders. b. cannot transfer greater rights than they have themselves. c. can take an instrument even when it is not indorsed to him or her. d. is a person to whom the instrument is transferred as a gift.

can receive more rights than the previous holders.

On May 15, 2015, Jason indorsed a check dated January 15, 2015, and payable by him to ALS Check Cashing Service. ALS: a. can be a holder in due course, even though the check is antedated. b. cannot be a holder in due course as it has notice that the instrument is overdue. c. cannot be a holder in due course only if ALS contacted the drawer who agreed to honor the check. d. can be a holder in due course only if ALS contacted the drawee who agreed to honor the check.

cannot be a holder in due course as it has notice that the instrument is overdue.

The court vests the responsibility of liquidating the assets of the debtor for the benefit of all interested parties in the: a. debtor in possession b. creditor in possession c. case trustee d. primary trustee

case trustee

An instrument containing an acknowledgment that a bank has received a sum of money and a promise by the bank to repay the sum of money is called a(n): a. installment note b. certificate of deposit c. promissory note d. certificate of demand

certificate of deposit

A check that a drawee bank guarantees will be paid to the holder is a: a. bank draft b. traveler's check c. certified check d. treasurer's check

certified check

Electronic ____________ is a system in which funds are electronically transferred from a customer's checking account, eliminating the need to process a paper check. a. fund transfer b. check transfer c. check conversion d. teller system

check conversion

A consumer has the right to claim an expedited credit if the customer asserts in good faith that the: a. bank charged the consumer's account for a substitute check that was not given to the consumer. b. check was not properly charged to the consumer's account. c. consumer did not suffer a resulting loss. d. production of another substitute check is necessary to determine the validity of any claim.

check was not properly charged to the consumer's account.

The only individuals specifically excluded from filing under Chapter 11 are: a. commodity brokers and stockbrokers. b. chartered accountants c. lawyers and judges d. real estate developers

commodity brokers and stockbrokers.

Lillian Fey purchases a night table from Aretha Boyner. Aretha wants Lillian to pay her by check before delivering the night table to Lillian's house. Lillian decides to attach an indorsement that reads, "Pay to Aretha Boyner if she delivers her night table to me, Lillian Fey, at 16 Holmes RD." This is an example of a(n) a. indorsement for deposit. b. conditional indorsement. c. qualified indorsement. d. significant indorsement.

conditional indorsement.

If a bank pays a forged check, it is liable for ____________ the payee's funds. a. converting b. detaining c. withholding d. diverting

converting

A debtor who continues to run a business and performs most of the functions that a trustee performs in other types of bankruptcy is called a(n): a. debtor in bankruptcy b. debtor in possession c. unimpaired debtor d. suspended debtor

debtor in possession

A(n) ____________ is an amount of any loss that is to be paid by the insured and can be a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. a. loan value b. deductible c. annuity d. cash surrender value

deductible

Under a ____________, the mortgagor conveys his or her interest in the property to a disinterested third party, known as a trustee. a. security agreement b. mortgage c. deed of trust d. subordination agreement

deed of trust

If a drawee refuses to pay the instrument, it is said to be: a. delayed b. dishonored c. detained d. defaulted

dishonored

Universal life insurance allows the policy owner to modify the: a. face value of the policy and the premiums. b. face value of the policy, but not the premiums. c. premiums, but not the face value of the policy. d. face value of the policy and obtain refunds of premiums already paid

face value of the policy and the premiums.

If a bank pays a check in cash to the payee, and the check is returned to the drawer with the next bank statement, the bank's settlement is said to be: a. provisional b. final c. in due course d. honored

final

The maximum time period that is allowed for Chapter 13 debtors to complete the payment plan is ____________ years. a. eight (8) b. ten (10) c. five (5) d. twelve (12)

five (5)

A(n) ____________ provision in the security agreement allows the security interest of the creditor to also apply to goods the debtor acquires at a later time. a. forbearance b. attachment c. floating lien d. acceleration

floating lien

An oral stop payment ordered by a drawer is valid: a. for 14 calendar days only b. if it is received in time and in such a manner as to afford the bank a reasonable opportunity to act on it. c. for only one year, unless renewed in writing. d. only on limited items payable on his or her account, and cannot be used for checks with a value of $500 and above.

for 14 calendar days only

If the mortgagor has defaulted or has failed to perform some other agreement in the mortgage, the mortgagee has the right to apply to a court to have the property sold. This is called the right to: a. acceleration b. foreclosure c. perfection d. attachment

foreclosure

According to the FTC's ____________, holders in due course who possess consumer credit contracts are subject to all claims and defenses that the buyer could use against the seller. a. shelter provision b. holder in due course rule c. lack of consideration rule d. universal defense rule

holder in due course rule

A(n) ____________ of a note is required to ____________ the instrument without reservations of any kind. a. indorser; pay b. maker; pay c. drawer, transfer d. maker; assign

indorser; pay

Indorsers are obligated to make the payment only when the: a. instrument has not been properly presented to the drawee or party obliged to pay the instrument. b. instrument is not dishonored c. notice of dishonor is not given to the secondary party within the time and manner mentioned. d. instrument has been properly presented to the drawee or party obliged to pay the instrument, and payment must be demanded.

instrument has been properly presented to the drawee or party obliged to pay the instrument, and payment must be demanded.

The right to equity of redemption: a. is the mortgagor's (debtor's) right to pay off the mortgage in full, including interest, and thus, discharge the debt in total. b. states that a default on one installment payment will make the entire balance due immediately, giving the mortgagee the right to collect the full amount. c. is the mortgagee's right to apply to a court to have the property sold. d. gives the mortgagor the right to receive each installment payment as it falls due.

is the mortgagor's (debtor's) right to pay off the mortgage in full, including interest, and thus, discharge the debt in total.

A ____________ loan is that which deliberately misstates the qualifications of a borrower to push a loan through the approval process. a. NINJA b. liar c. subprime d. home equity

liar

An acceleration of the debt: a. increases the interest rate. b. makes the entire amount of the debt due for immediate payment. c. increases the monthly payment amount. d. makes the repayment period of the entire debt one year.

makes the entire amount of the debt due for immediate payment.

A(n) ____________ is a transfer of an interest in real property for the purpose of creating a security for a debt. a. mortgage b. secured loan c. security interest d. unsecured loan

mortgage

To accept a draft, the drawee: a. need only sign the draft across the face of the instrument. b. needs to write "accepted" on a separate piece of paper. c. need only sign on a separate piece of paper affixed to the draft. d. needs to write "accepted" behind the instrument and sign the bank's record.

need only sign the draft across the face of the instrument.

Any person who ____________ contributes to the ____________ of an instrument ____________ exercise the defense of ____________ against a holder in due course who pays the instrument in good faith. a. negligently; fraud in the inducement; may; alteration b. negligently; presentment; may not; alteration c. intentionally; material alteration; may; alteration d. negligently; material alteration; may not; alteration

negligently; material alteration; may not; alteration

The words "without recourse" on an indorsement means the indorser is: a. liable personally, but not other parties. b. not liable for any problems associated with the instrument. c. not liable if the instrument is dishonored. d. liable for only up to fifty per cent of the loss.

not liable if the instrument is dishonored.

A point is a one-time charge equal to ____________ of the principal amount borrowed a. one-tenth b. three percent c. one percent d. ten percent

one percent

The absolute time limit for notifying a bank of a forged or altered check is ____________ from the time the depositor receives the bank statement. a. fourteen days b. thirty days c. one year d. three years

one year

A blank indorsement should be used: a. only for the purpose of deposit or collection. b. to impose warranty liability on the maker. c. to reserve more space for other indorsements. d. only in limited situations.

only in limited situations.

If an instrument states, "Pay to the order of Karen Fuji or her assigns," it is payable to: a. order b. cash c. bearer d. holder

order

A defense that may not be used against a holder in due course of a negotiable instrument is a: a. limited defense b. personal defense c. real defense d. secondary defense

personal defense

__________ means a demand made by a holder to pay or accept an instrument a. dishonor b. presentment c. alteration d. real defense

presentment

An uninsured motorist drove through a red light and hit the passenger side of David's car. David, the driver, suffered a concussion, and the passenger, Jayne, broke her right arm and leg. David's car sustained extensive damages that would cost $2,000 to repair. If David has uninsured-motorist insurance, the coverage will: a. protect David, but not Jayne. b. protect David and Jayne and reimburse David for the $2,000 in damages to his car. c. protect David and Jayne, but not cover any of the damages to David's car. d. cover any injuries sustained by the uninsured motorist, to prevent the motorist from suing David.

protect David and Jayne, but not cover any of the damages to David's car.

Dishonor means: a. fraud in the payment method. b. deception in the amount of payment c. refusal to pay a negotiable instrument d. an extension of payment

refusal to pay a negotiable instrument

In a ____________, a qualified debtor creates a plan that alters the repayment schedule. a. firm offer b. requirements contract c. reorganization d. contract for sale

reorganization

A check indorsed "for deposit only": a. prevents further negotiation of the instrument. b. requires the amount of the instrument to be credited to the indorser's account before further negotiation occurs. c. requires the amount of the instrument to be credited to the indorser's account and prevents further negotiation. d. requires the amount of the instrument to be further indorsed by the payee in person before being credited to the indorser's account.

requires the amount of the instrument to be credited to the indorser's account before further negotiation occurs.

Generally, a security interest is perfected when the: a. secured party has done everything that the law requires to give the secured party greater rights to the goods than others have. b. secured party has a legally enforceable right to take that property and sell it to satisfy the debt. c. buyer takes the property subject to a mortgage and the seller agrees to continue paying the debt. d. goods are sold, but regained as soon as the debtor takes possession of the new property.

secured party has done everything that the law requires to give the secured party greater rights to the goods than others have.

A(n) ____________ loan is one in which creditors have something of value, usually called ____________, which they can ____________ if the debtor ____________. a. priority; collateral; sell; defaults b. unsecured; collateral; sell; dies c. unsecured; collateral; possess; defaults d. secured; collateral; possess; defaults

secured; collateral; possess; defaults

The process of ____________ occurs when many mortgages are bundled together and sold as bonds to institutions, such as pension funds. a. perfection b. foreclosure c. acceleration d. securitization

securitization

A(n) ____________ agreement is a written contract which identifies the secured goods and is signed by the debtor. a. subordination b. security c. consumer loan d. equitable redepmtion

security

Of the groups listed below, only ____________ can take advantage of Chapter 13 provisions. a. self-employed people b. corporations c. partnerships d. educational institutions

self-employed people

Writing the words, "pay to the order of" or "pay to", followed by name of the indorsee and the signature of the indorser on an instrument makes it a ____________ indorsement. a. special b. restrictive c. qualified d. conditional

special

A(n) ____________ is a check that is presented for payment more than six months after its date. a. overdraft b. postdated check c. antedated check d. stale check

stale check

Green Grocer Wholesale, Inc. received an $850.00 check from Bob for a grocery purchase. The check was from Forest Enterprises to Ana and had been indorsed to Bob who, in turn, indorsed the check to Green. The clerk at Green failed to carefully examine the check, not noticing that the number 5 had been changed to an 8. Green Grocer has: a. not taken the instrument in good faith. b. taken the instrument in good faith. c. not taken the instrument in good faith to $500. d. taken the instrument in good faith to $300.

taken the instrument in good faith.

A ____________ check is a check drawn by one bank on another bank in which it has funds on deposit in favor of a third person, the payee. a. traveler's b. teller's c. cashier's d. certified

teller's

Under Chapter 13 of the Bankruptcy Code, a debtor must begin payments within a period of ____________ from submission. a. three days b. thirteen days c. thirty days d. thirty-three days

thirty days

A check for which the issuing financial institution is both the drawer and the drawee is called a ____________. a. bank draft b. teller's check c. certified check d. traveler's check

traveler's check

Kaycee obtains fire insurance on an empty warehouse. Later, Kaycee manufactures and stores fireworks in the building. A lightning strike in a thunderstorm explodes the fireworks and destroys the building. The fire insurance policy is: a. valid, since the building was empty when the policy was obtained. b. void, since a material change in risk occurred. c. voidable if the lightning was not foreseeable. d. valid, since there are negligible liabilities which applies to storing fireworks.

void, since a material change in risk occurred.