fin 240 kaplowitz worksheet 25.1: types of negotiable instruments
Promissory note
a written promise made by one person, the maker, to pay a fixed sum of money to another person, the payee or a subsequent holder, on demand or on a specified date
Payee
eastman supply company
Drawee
first national bank of whitacre
A promissory note can be made payable at a(n) _____ time, which is also known as "on demand."
indefinite
Drawer
jane adams
A fundamental function of negotiable instruments is to make sure that the instrument can be easily transferred without danger of becoming uncollectible.
true
A negotiable instrument can function as a substitute for cash or an extension of credit.
true
A negotiable instrument is a signed writing that contains an unconditional promise or order to pay an exact amount, either on demand or at a specified future time.
true
Assignment of a promissory note does not affect the maker's obligation to pay the note as promised.
true
Because certificates of deposit (CDs) are time deposits, the purchaser-payee typically is not allowed to withdraw the funds before the date of maturity.
true
Checks are _____ instruments because they are payable on demand.
demand
Banker's acceptance
drawn by a creditor against the debtor, who pays the draft at maturity; the drawer creates a draft without designating a payee; the draft can pass through many parties' hands before a bank, the drawee, accepts it, transforming the draft into a banker's acceptance
Acceptance
the drawee's signed agreement to pay a draft when presented
Issue
the first transfer, or delivery, of an instrument to a holder
If an owner of a certificate of deposit (CD) wants to withdraw the funds before the date of maturity, what are her or his choices?
the owner can sell the cd to a third party
Drawer
the party that initiates a draft (writes a check, for example), thereby ordering the drawee to pay
Drawee
the party that is ordered to pay a draft or check; with a check, a financial institution is always the drawee
If a seller of goods is both the drawer and the payee of a draft, the drawer has created a:
trade acceptance
Check
a draft drawn by a drawer ordering the drawee bank or financial institution to pay a certain amount of money to the holder on demand
Trade acceptance
a draft that is drawn by a seller of goods ordering the buyer to pay a specified sum of money to the seller, usually at a stated time in the future; on a trade acceptance, the seller is both the drawer and the payee
Certificate of deposit (CD)
a note of a bank in which a bank acknowledges a receipt of money from a party and promises to repay the money, with interest, to the party on a certain date
Payee
a person to whom an instrument is made payable
Negotiable instrument
a signed writing that contains an unconditional promise or order to pay an exact sum of money, on demand or at an exact future time, to a specific person or order, or to bearer
The difference between a time draft and a sight draft is that:
a time draft is payable at a definite future time, whereas a sight draft is payable when it is presented to the drawee
The Uniform Commercial Code article that deals with negotiable instruments is:
article 3
Maker
one who promises to pay a certain sum to the holder of a promissory note or certificate of deposit (cd)
