Law for Accountants Exam 2
Tammy's ATM card is stolen. If she notifies the issuer of the card of the theft within two business days of theft, Tammy will be liable for ____________ of unauthorized use. Multiple Choice $50 $100 $500 $1,000
$50
Through what kind of written instrument would Tim direct Howard to pay $600 to the order of Celeste? Multiple Choice A certificate of deposit A note A draft 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: Multiple Choice Planter is the originator and Ace is the beneficiary. Ace is the originator and Chase Superior is the beneficiary. Ace is the originator and Planter is the beneficiary. Fourth National is the beneficiary and Chase Superior, the originator.
Ace is the originator and Planter is the beneficiary.
____________ coverage permits a driver to buy optional coverage, such as personal injury insurance, that would allow him or her to receive payment without bothering to determine fault. Multiple Choice Comprehensive Add-on Threshold Collision
Add-on
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? Multiple Choice Automatic stay on all cash advances paid to a creditor under an open-ended credit plan Automatic stay and discharge of any debt created with the securities fraud Automatic stay, but no discharge of any debt created by the securities fraud 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? Multiple Choice The payee does not have the obligation of informing the drawer of the nonpayment of the check. Bad-check statutes are effectively used as a means of collection. The payee can prosecute the drawer immediately after being notified of a bad check by the drawee bank. 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? Multiple Choice Betty has a real defense against Carl and Cash-All-Checks. Betty has no defense against Cash-All-Checks, hence the latter will be successful. Betty has a personal defense that allows Cash-All-Checks to be successful. 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.
Joe had made an agreement with Auto Insurance Co. not to use his van for commercial business purposes when he purchased auto insurance. Joe had an accident while delivering pizzas for Bigger Pizza, Inc. For which type of violation will Joe not be covered under his insurance? Multiple Choice Fraudulent concealment Misrepresentation Concealment Breach of warranty
Breach of warranty
How does a bank verify the signature of its customers? Multiple Choice By the substitute check held by the bank for reference purposes By the signature card filled in by the customer when the account is opened By the signature provided in documents such as passports, ID cards, etc. By the pin number provided by the bank with the ATM card
By the signature card filled in by the customer when the account is opened
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? Multiple Choice Carmel Enterprises only Carmel Enterprises and David only Carmel Enterprises, Sigma Enterprises, David, and Vulcan Co. 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? Multiple Choice Chapter 7 only Chapter 11 and Chapter 7 Chapter 7 and Chapter 12 Chapter 12
Chapter 12
Which chapter of the bankruptcy code allows a federal homestead exemption? Multiple Choice Chapter 11 Chapter 7 Chapter 8 Chapter 12
Chapter 7
If Daphne gave value for and cashes Lisa's check, what legal rights, if any, does Daphne have? Multiple Choice Daphne may insist upon an unqualified indorsement. Daphne may not insist upon any particular type of indorsement. Daphne may insist upon both an unqualified indorsement and a restrictive indorsement. Daphne may insist upon an unqualified, restrictive and special indorsement.
Daphne may insist upon an unqualified indorsement.
Which of the following is true of a bank's duty to honor checks? Multiple Choice 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. If there are insufficient funds on deposit, the bank may charge the customer's account if it does not create an overdraft. 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. 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? Multiple Choice It can be used when the instrument is negotiated to a holder in due course. It can be used when no consideration exists in the underlying contract for which the instrument was issued. It can be used when one of the parties breaches the contract by not furnishing the agreed consideration. 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.
If a bank uses a substitute check, it makes which of the following warranties? Multiple Choice It is not a legal equivalent of the original check. It contains an accurate image of the front and back of the original check. The drawer, indorser, or the depositary bank will be asked to pay a check that has already been paid. Original checks have to be presented to the drawee bank for payment.
It contains an accurate image of the front and back of the original check.
Which of the following is true of coinsurance? Multiple Choice It is rarely found in property insurance policies. 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. It excuses the insured from paying premiums if he or she becomes disabled. 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? Multiple Choice It is drawn in one state and payable in another state. It is drawn in one nation and payable in another nation. It is drawn on one bank and payable to a governmental body. 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? Multiple Choice Contributory negligence Lack of delivery Failure of consideration Lack of possession
Lack of delivery
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? Multiple Choice Mark must pay these notes since duress is not involved. Mark does not have to pay these notes since he has a real defense. Mark must pay these notes since there is a fraud in the inducement. 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.
Stanley falls into the low-income group. Which of the following health care plans can Stanley opt for? Multiple Choice Medicaid Long-term care insurance Medicare Mediclaim
Medicaid
Bill has a $500,000 life insurance policy naming his minor children as beneficiaries. Bill is shot and killed while breaking into his neighbor's home. Will Bill's children likely be able to collect the life insurance proceeds? Multiple Choice No, policies often do not cover the insured when he/she violates the law. Yes, as it would not be against public policy for beneficiaries to receive insurance proceeds in such a case. Yes, but not entirely. They will be given an allowance for necessaries with the balance going to others. No, all the proceeds will go to a state administrated crime victims' fund.
No, policies often do not cover the insured when he/she violates the law.
Omar receives a check from Trudy drawn on Shelfari Bank. Shelfari Bank improperly dishonors the check when Omar attempts to cash it. Which of the following is true of this case? Multiple Choice Omar is the holder of the check, and hence, has recourse against Trudy, the drawer. Shelfari Bank, the drawee bank, is liable to Omar, the holder, for improperly dishonoring the check. Omar has recourse against both the parties—the drawer, Trudy, and the drawee bank, Shelfari Bank. Omar has recourse against Shelfari Bank, in case Trudy does not reimburse Omar.
Omar is the holder of the check, and hence, has recourse against Trudy, the drawer.
____________ means a demand made by a holder to pay or accept an instrument. Multiple Choice Dishonor Presentment Alteration Real defense
Presentment
Peter lost control of his car and drove it though his neighbor Clyde's fence. If Clyde were to bring a claim against Peter for the damage to the fence, what type of insurance would Peter need to cover the damage? Multiple Choice Homeowner's insurance Property damage liability insurance Collision insurance No-fault insurance
Property damage liability insurance
Which of the following is true of real defenses? Multiple Choice Real defenses can be used against holders, but not holders in due course. Anyone who has a real defense is required to pay an instrument. Real defenses can be used against everyone, including holders in due course. 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? Multiple Choice A failure to record the first mortgage would remove the obligation of the mortgagor to the first mortgagee. The second mortgagee must know about the first mortgage and is exempted to record the mortgage. If the mortgage is not recorded and a later mortgage is given on the same property, the old mortgage is superior to the second. 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.
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. Multiple Choice Sharkey can legally forge Evie's indorsement as Brianna did not intend Evie to have any interest. Sharkey cannot cash the check unless Evie indorses it herself. If Sharkey forges Evie's indorsement, he can be held liable for the tort of conversion. 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? Multiple Choice Sopan is not a holder in due course, but has the rights of a holder in due course. Sopan is not a holder in due course and has no rights of a holder in due course. Sopan is not a holder in due course, but does qualify as a holder in gift status. 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? Multiple Choice Limited-payment life insurance Universal life insurance Straight life insurance Term life insurance
Straight life insurance
____________ insurance offers protection alone, and is the least expensive kind of life insurance. Multiple Choice Straight life Universal life Limited-payment life Term
Term
Which of the following is true of the relationship between the drawee bank and its customer? Multiple Choice The drawee bank becomes a creditor and the customer becomes a debtor at the time of opening a checking account. The drawee bank becomes an insurer and the customer the insured at the time of opening a checking account. The drawee bank becomes the customer's debtor at the time of opening a checking account and agent while collecting checks. 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? Multiple Choice The indorser is not entitled to enforce the instrument. The indorser warrants that the instrument is subject to a defense of any party that can be asserted against the indorser. The indorser warrants that he or she has knowledge of the bankruptcy of the maker, acceptor, or drawer. 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? Multiple Choice The losses due to theft and the injuries sustained by the officer, but not the losses incurred by the fire. The losses due to fire and the injuries sustained by the officer, but not the losses incurred by theft. The losses incurred due to fire and theft, but not 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.
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? Multiple Choice Within seven business days of the date of her deposit Within three business days of the date of her deposit Within ten business days of the date of her deposit The next business day following the date of her deposit
The next business day following the date of her deposit
Chuck deposits his paycheck drawn on Big Bank at Small Bank, and his account is credited with this deposit. Three days later, Chuck is notified by Small Bank that his paycheck has been dishonored by Big Bank due to insufficient funds, and the amount of the check has been deducted from Chuck's Small Bank account. Which of the following is true of this situation? Multiple Choice The settlement by Small Bank was provisional and was rightfully rescinded since the paycheck was dishonored. Small Bank acted too slowly and did not comply with the prescribed schedule of Regulation CC. Big Bank is the payor bank and hence, must reimburse Small Bank, the depositor bank. Small Bank cannot credit Chuck's account until it is certain that Big Bank will honor the check.
The settlement by Small Bank was provisional and was rightfully rescinded since the paycheck was dishonored.
Which of these is true regarding "failure of consideration" and "lack of consideration"? Multiple Choice They are real defenses which can be used against holders in due course. Failure of consideration is a real defense and lack of consideration is a personal defense. Failure of consideration is a personal defense and lack of consideration is a real defense. 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.
Faith owes $50,000 to Investment Lenders, Inc., a partnership of Cindy and Ryan. She is also a partner with Tom in a business venture. What insurable interests exist in this situation? Multiple Choice Faith has an insurable interest in the lives of Cindy and Ryan. Investment Lenders, Inc. has an insurable interest in Tom, but does not have an insurable interest in Faith. Only Tom and Faith have insurable interests. Tom and Faith have insurable interests in each other's lives and Investment Lenders, Inc. has an insurable interest in Faith.
Tom and Faith have insurable interests in each other's lives and Investment Lenders, Inc. has an insurable interest in Faith.
Winston was going to be out of town on September 1, when his rent would be due. On August 20 he gave his landlord Becky a check dated September 1, with instructions not to deposit or cash the check until September 1. As the instructions to Becky were clear, he did not notify the bank of the postdated check. On August 21, Becky deposited the check in her account at her bank and the check was dishonored on August 23. Which of the following is true of this scenario? Multiple Choice Winston has recourse against Becky as she did not follow his instructions. Winston has recourse against Becky and the bank since it failed to refuse the item when deposited. Winston has recourse against the bank as it failed to notify Winston of the check acceptance and failed to refuse the item when deposited. Winston did not notify the bank not to pay it before the date on the check, hence he has no recourse.
Winston did not notify the bank not to pay it before the date on the check, hence he has no recourse.
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? Multiple Choice The bank, if it filed and perfected its interest first The bank because of the "floating lien" loan agreement Xerox, if it filed the loan agreement before the bank did 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: Multiple Choice natural persons, but not corporations. a holder in due course of a negotiable instrument, but not a holder. a holder, but not a holder in due course of a negotiable instrument. 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: Multiple Choice according to whether an attached security interest in inventory has priority over a conflicting security interest in the same inventory. by consumers' perfected security interests of which they have no knowledge. based on whether the seller's inventory prevails over buyers of goods in the ordinary course of business (except farm products). 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. Multiple Choice actual cash value outstanding loan value replacement value stated value
actual cash value
The Identity Theft Penalty Enhancement Act added a new crime called ____________ to the original statute. Multiple Choice aggravated identity theft fraudulent misrepresentation uttering identity violation
aggravated identity theft
In 1978, Chapters 11 and 13 of the Bankruptcy Code were created, which: Multiple Choice made it easier for creditors to obtain bankruptcy relief. allowed businesses and individuals to reorganize and keep going. made it more difficult to declare bankruptcy. 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: Multiple Choice as to the essential nature of the transaction, which may not 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. in the inducement, which may not be used as a defense against a holder in due course. 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.
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. Multiple Choice demand note promissory note bill of exchange certificate of deposit
bill of exchange
A(n) ____________ will provide temporary insurance coverage until the policy is formally accepted. Multiple Choice premium adhesion contract warranty 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: Multiple Choice fraud in the inducement. failure of consideration. breach of contract. 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: Multiple Choice only by Gloria Schell, since her name appears first. by either payee, since the indorsement of only one of the payees is necessary to negotiate the check. by both payees. by the maker.
by both payees.
A holder in due course of a negotiable instrument: Multiple Choice can receive more rights than the previous holders. cannot transfer greater rights than they have themselves. can take an instrument even when it is not indorsed to him or her. 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: Multiple Choice can be a holder in due course, even though the check is antedated. cannot be a holder in due course as it has notice that the instrument is overdue. cannot be a holder in due course only if ALS contacted the drawer who agreed to honor the check. 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: Multiple Choice debtor in possession. creditor in possession. case trustee. 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): Multiple Choice installment note. certificate of deposit. promissory note. certificate of demand.
certificate of deposit.
A check that a drawee bank guarantees will be paid to the holder is a: Multiple Choice bank draft. traveler's check. certified check. 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. Multiple Choice fund transfer check transfer check conversion teller system
check conversion
A consumer has the right to claim an expedited credit if the customer asserts in good faith that the: Multiple Choice bank charged the consumer's account for a substitute check that was not given to the consumer. check was not properly charged to the consumer's account. consumer did not suffer a resulting loss. production of another substitute check is necessary to determine the validity of any claim.
check was not properly charged to the consumer's account.
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) Multiple Choice indorsement for deposit. conditional indorsement. qualified indorsement. significant indorsement.
conditional indorsement.
If a bank pays a forged check, it is liable for ____________ the payee's funds. Multiple Choice converting detaining withholding 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): Multiple Choice debtor in bankruptcy. debtor in possession. unimpaired debtor. 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. Multiple Choice loan value deductible annuity 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. Multiple Choice security agreement mortgage deed of trust subordination agreement
deed of trust
The first bank to which an item is transferred for collection is called a(n) ____________ bank. Multiple Choice local remitting depositary intermediary
depositary
If a drawee refuses to pay the instrument, it is said to be: Multiple Choice delayed. dishonored. detained. defaulted.
dishonored.
Universal life insurance allows the policy owner to modify the: Multiple Choice face value of the policy and the premiums. face value of the policy, but not the premiums. premiums, but not the face value of the policy. 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: Multiple Choice provisional. final. in due course. honored.
final.
A protection that insures property that cannot be covered by specific insurance because the property is constantly changing in either value or location is referred to as a(n): Multiple Choice floater policy. collision insurance. annuity. coinsurance.
floater policy.
An oral stop payment ordered by a drawer is valid: Multiple Choice for 14 calendar days only. if it is received in time and in such a manner as to afford the bank a reasonable opportunity to act on it. for only one year, unless renewed in writing. 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: Multiple Choice acceleration. foreclosure. perfection. 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. Multiple Choice shelter provision holder in due course rule lack of consideration rule universal defense rule
holder in due course rule
Indorsers are obligated to make the payment only when the: Multiple Choice instrument has not been properly presented to the drawee or party obliged to pay the instrument. instrument is not dishonored. notice of dishonor is not given to the secondary party within the time and manner mentioned. 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.
If an insured purchases a guaranteed insurability provision on a life insurance policy, the: Multiple Choice insured is allowed to pay an extra initial premium in exchange for an assured option to buy more insurance at certain specified times later with no questions asked. insurer is allowed to excuse the insured from paying premiums if the insured becomes disabled. insured has to pay an extra $25 in exchange for a guarantee of coverage by the insurance, should the insured become disabled. insurer has to pay double the amount of the policy to the beneficiary if the insured dies from accidental causes.
insured is allowed to pay an extra initial premium in exchange for an assured option to buy more insurance at certain specified times later with no questions asked.
The ____________ accepts the risk of loss in return for a premium. Multiple Choice insured insurer beneficiary benefactor
insurer
The right to equity of redemption: Multiple Choice is the mortgagor's (debtor's) right to pay off the mortgage in full, including interest, and thus, discharge the debt in total. 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. is the mortgagee's right to apply to a court to have the property sold. 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(n) ____________ of a note is required to ____________ the instrument without reservations of any kind. Multiple Choice indorser; pay maker; pay drawer; transfer maker; assign
maker; pay
An acceleration of the debt: Multiple Choice increases the interest rate. makes the entire amount of the debt due for immediate payment. increases the monthly payment amount. makes the repayment period of the entire debt one year.
makes the entire amount of the debt due for immediate payment.
To accept a draft, the drawee: Multiple Choice need only sign the draft across the face of the instrument. needs to write "accepted" on a separate piece of paper. need only sign on a separate piece of paper affixed to the draft. 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. Multiple Choice negligently; fraud in the inducement; may; alteration negligently; presentment; may not; alteration intentionally; material alteration; may; alteration negligently; material alteration; may not; alteration
negligently; material alteration; may not; alteration
The words "without recourse" on an indorsement means the indorser is: Multiple Choice liable personally, but not other parties. not liable for any problems associated with the instrument. not liable if the instrument is dishonored. 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. Multiple Choice one-tenth three percent one percent 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. Multiple Choice fourteen days thirty days one year three years
one year
A blank indorsement should be used: Multiple Choice only for the purpose of deposit or collection. to impose warranty liability on the maker. to reserve more space for other indorsements. 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: Multiple Choice order. cash. bearer. holder.
order.
A defense that may not be used against a holder in due course of a negotiable instrument is a: Multiple Choice limited defense. personal defense. real defense. secondary defense.
personal defense.
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: Multiple Choice protect David, but not Jayne. protect David and Jayne and reimburse David for the $2,000 in damages to his car. protect David and Jayne, but not cover any of the damages to David's car. 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: Multiple Choice fraud in the payment method. deception in the amount of payment. refusal to pay a negotiable instrument. an extension of payment.
refusal to pay a negotiable instrument.
In a ____________, a qualified debtor creates a plan that alters the repayment schedule. Multiple Choice firm offer requirements contract reorganization contract for sale
reorganization
A check indorsed "for deposit only": Multiple Choice prevents further negotiation of the instrument. requires the amount of the instrument to be credited to the indorser's account before further negotiation occurs. requires the amount of the instrument to be credited to the indorser's account and prevents further negotiation. 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: Multiple Choice secured party has done everything that the law requires to give the secured party greater rights to the goods than others have. secured party has a legally enforceable right to take that property and sell it to satisfy the debt. buyer takes the property subject to a mortgage and the seller agrees to continue paying the debt. 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.
The process of ____________ occurs when many mortgages are bundled together and sold as bonds to institutions, such as pension funds. Multiple Choice perfection foreclosure acceleration securitization
securitization
A(n) ____________ agreement is a written contract which identifies the secured goods and is signed by the debtor. Multiple Choice subordination security consumer loan equitable redemption
security
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. Multiple Choice special restrictive qualified conditional
special
A(n) ____________ is a check that is presented for payment more than six months after its date. Multiple Choice overdraft postdated check antedated check 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: Multiple Choice not taken the instrument in good faith. taken the instrument in good faith. not taken the instrument in good faith to $500. 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. Multiple Choice traveler's teller's cashier's certified
teller's
Under Chapter 13 of the Bankruptcy Code, a debtor must begin payments within a period of ____________ from submission. Multiple Choice three days thirteen days thirty days thirty-three days
thirty days
A check for which the issuing financial institution is both the drawer and the drawee is called a ____________. Multiple Choice bank draft teller's check certified check traveler's check
traveler's check
Kelley offers Hamilton a $20,000 check which she knows has been forged. Her offer is best known as: Multiple Choice chiseling. uttering. altering. remitting.
uttering.
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: Multiple Choice valid, since the building was empty when the policy was obtained. void, since a material change in risk occurred. voidable if the lightning was not foreseeable. valid, since there are negligible liabilities which applies to storing fireworks.
void, since a material change in risk occurred.
In most states, an innocent misrepresentation by the insured would make the policy: Multiple Choice voidable by the insurer. voidable by the beneficiary. enforceable, since there was no intentional misconduct. enforceable to a reasonable amount as determined by the court.
voidable by the insurer.
