BL Worksheet, Chapter 10 & 11
True/False
Indicate whether the statement is true or false.
____
1. The most common type of negotiable instrument is the check.
____
2. A promissory note is difficult to transfer.
____
3. A negotiable instrument may be oral or written.
____
4. The promise in a note or the order in a draft must be unconditional.
____
5. Drawers are responsible for altered or forged checks regardless of their care in making out the check.
____
6. A qualified indorsement limits the liability of the indorser.
____
7. Holders in due course take instruments of value in good faith and without notice that the instrument is
defective.
____
8. Personal defenses, such as breach of contract, can be used against a holder in due course.
____
9. The Check 21 Act allows electronic processing to clear checks quickly and safely.
____ 10. If your bank refuses to cash your check when sufficient funds are available, it would be a breach of the bank’s
contract.
____ 11. When you try to obtain credit, the lender will review your application and determine whether you are a good
credit risk.
____ 12. If your credit card is lost or stolen, you are responsible for up to $500 of unauthorized charges.
____ 13. A guarantor agrees to pay off a debt only if the debtor defaults, while a surety agrees to pay off a debt
outright.
____ 14. Student loans can be discharged in bankruptcy in most cases.
____ 15. Open-end credit may be increased by the debtor, up to a limit set by the creditor.
____ 16. A secured loan may require that the creditor actually possess the collateral.
____ 17. Collateral used to secure a loan must be either a home, a car, or a boat.
____ 18. If the debtor defaults on a loan, the secured party may take the collateral and sell it at auction.
____ 19. In order to make a wise purchasing decision when using your credit card, consider the interest rate and other
fees you are charged.
____ 20. When a security interest attaches, it is effective between the debtor, the creditor, and the primary party.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 21. An order to a third party to pay money is called a
a. draft.
c. certificate of deposit.
b. note.
d. bill of lading.
____ 22. A draft that is payable upon presentation to the drawee is a(n)
a. time draft.
c. sight draft.
b. accepted draft.
d. immediate draft.
____ 23. A note issued by a bank that earns interest over time is called a
a. certificate of deposit.
c. time draft.
b. secured interest.
d. security agreement.
____ 24. The person who writes a promissory note is called a(n)
a. drawer.
c. payee.
b. maker.
d. acceptor.
____ 25. A check that is more than six months old is a
a. void check.
b. stale check.
c. voidable check.
d. bad check.
____ 26. If you want to cancel a check that you have written but that has not been paid, you can issue a
a. material alteration order.
c. stop-payment order.
b. stale check order.
d. substitute check order.
____ 27. Negotiability allows for the transferee to become a holder, while assignability allows for the
a. transferee to avoid liability for errors made as the instrument is transferred.
b. instrument to be transferred to someone else without the transferee becoming a holder.
c. transferee to obtain legal indorsements in a timely fashion.
d. instrument to be void of dates and controlling words.
____ 28. In order to be negotiable, negotiable instruments must
a. be made orally or in writing.
c. have a signature.
b. be conditional.
d. not have a definite time they are due.
____ 29. Which of the following is not authorized under the Electronic Fund Transfer Act (EFTA)?
a. paying your bills electronically
b. making purchases with your debit card
c. direct deposits into your checking account
d. overdraft protection on all purchases over $500
____ 30. The Check 21 Act allows for a substitute check and a(n)
a. electronic signature to replace the original signature.
b. quick reconciliation process of your checking account.
c. stop-payment order as needed.
d. direct withdrawal from your checking account when requested.
____ 31. The party who buys goods on credit or borrows money is called the
a. secured party.
c. debtor.
b. creditor.
____ 32. Charge card accounts are examples of
a. usury.
b. open-end credit.
d. loanee.
c. secured loans.
d. closed-end credit.
____ 33. The property pledged by the debtor as security for the debt is the
a. surety.
c. interest.
b. credit.
d. collateral.
____ 34. There are two types of parties who can guarantee a loan:
a. the debtors and the secured parties.
b. guarantors and sureties.
c. guarantors and security agreements.
d. sureties and security agreements.
____ 35. In a transaction for the sale of goods, the security interest
a. is not legally enforceable by the secured party.
b. is not available to be sold at auction if a default occurs.
c. attaches to the actual individual goods.
d. attaches to after-acquired property.
____ 36. Credit that can be increased by the debtor by continuing to purchase goods or services on credit is called
a. installment credit.
c. closed-end credit.
b. open-end credit.
d. credit with collateral.
____ 37. When the security interest is on inventory, the security interest attaches to
a. all the inventory, including new inventory that comes or goes from the business.
b. all the inventory owned at the time of the attachment.
c. a percentage of all the new inventory coming into the business.
d. a percentage of all the inventory owned at the time of the attachment.
____ 38. When you buy a car on credit, it is important to know the APR, which is the
a. cost of the loan in dollars and cents.
b. collateral your lender will require.
c. true interest rate of the loan.
d. total amount you will borrow.
____ 39. If you dispute a purchase you made using your credit card, you
a. have no recourse.
b. must pay the bill and then negotiate a refund from the merchant.
c. should cancel your credit card.
d. do not have to pay the bill for the item.
____ 40. In Germany, all car dealers must offer a warranty on used cars for a period of at least
a. one year.
c. two years.
b. six months.
d. three months.
Matching
Match each term with its definition.
a. negotiable instrument
f.
drawer
b.
c.
d.
e.
note
maker
payee
assignment
g.
h.
i.
j.
drawee
holder in due course
holder
indorsement
____ 41. Someone who takes an instrument for value, in good faith, and without notice that the instrument is defective
____ 42. Also known as commercial paper
____ 43. A written promise by one person to pay money to another person
____ 44. A person who has a written promise to be paid money by another person
____ 45. The transfer of your rights under a contract to someone else
____ 46. The act of placing one’s signature on an instrument to transfer it to someone else
____ 47. A person who orders money to be paid in a draft
____ 48. A person to whom an order is given to pay money in a draft
____ 49. Someone who receives a check made out in his or her name
____ 50. A person who has written a promise to pay money to another person
Match each term with its definition.
a. credit
b. interest
c. creditor
d. debtor
e. open-end credit
f.
g.
h.
i.
j.
closed-end credit
APR
collateral
finance charge
security interest
____ 51. Party who buys goods on credit or borrows money
____ 52. Credit that can be increased by the creditor, by continuing to purchase food or services on credit
____ 53. Fee the borrower pays to the lender for using money
____ 54. The true interest rate of the loan
____ 55. Credit that is extended only for a specific amount of money and cannot be increased by making additional
purchases
____ 56. Party who sells goods on credit or lends money
____ 57. An arrangement through which you may receive cash, goods, or services now and pay for them in the future
____ 58. The cost of the loan in dollars and cents
____ 59. Consumer goods, cars, inventory, homes, and other items pledged to protect a lender if the borrower fails to
repay
____ 60. Attaches when it is legally enforceable by the secured party
BL Worksheet, Chapter 10 & 11
Answer Section
TRUE/FALSE
1. ANS:
NAT:
2. ANS:
NAT:
3. ANS:
NAT:
4. ANS:
NAT:
5. ANS:
NAT:
6. ANS:
7. ANS:
8. ANS:
9. ANS:
10. ANS:
NAT:
11. ANS:
12. ANS:
13. ANS:
14. ANS:
15. ANS:
16. ANS:
NAT:
17. ANS:
NAT:
18. ANS:
19. ANS:
20. ANS:
NAT:
T
PTS: 1
DIF:
NBEA VI | NBEA VIA
F
PTS: 1
DIF:
NBEA VI | NBEA VIA
F
PTS: 1
DIF:
NBEA VI | NBEA VIA | NBEA VIA3c
T
PTS: 1
DIF:
NBEA VI | NBEA VIA | NBEA VIA3c
F
PTS: 1
DIF:
NBEA VIA3g
T
PTS: 1
DIF:
T
PTS: 1
DIF:
F
PTS: 1
DIF:
T
PTS: 1
DIF:
T
PTS: 1
DIF:
NBEA VIA3e
T
PTS: 1
DIF:
F
PTS: 1
DIF:
T
PTS: 1
DIF:
F
PTS: 1
DIF:
T
PTS: 1
DIF:
T
PTS: 1
DIF:
NBEA VIC
F
PTS: 1
DIF:
NBEA VIC3b
T
PTS: 1
DIF:
T
PTS: 1
DIF:
F
PTS: 1
DIF:
NBEA VIC
1
REF: 235
1
REF: 227
1
REF: 228
1
REF: 229
2
REF: 236
2
2
2
1
1
REF:
REF:
REF:
REF:
REF:
232
232
232
236
235
1
1
2
2
1
2
REF:
REF:
REF:
REF:
REF:
REF:
248
255
250
256
247
248
1
REF: 248
1
1
2
REF: 248
REF: 254
REF: 250
DIF: 1
REF: 227
DIF: 2
REF: 227
DIF: 1
REF: 227
DIF: 1
REF: 227
DIF: 1
REF: 235
MULTIPLE CHOICE
21. ANS:
NAT:
22. ANS:
NAT:
23. ANS:
NAT:
24. ANS:
NAT:
25. ANS:
A
PTS: 1
NBEA VI | NBEA VIA
C
PTS: 1
NBEA VI | NBEA VIA
A
PTS: 1
NBEA VI | NBEA VIA
B
PTS: 1
NBEA VI | NBEA VIA
B
PTS: 1
NAT:
26. ANS:
NAT:
27. ANS:
NAT:
28. ANS:
NAT:
29. ANS:
30. ANS:
31. ANS:
32. ANS:
33. ANS:
34. ANS:
35. ANS:
NAT:
36. ANS:
37. ANS:
NAT:
38. ANS:
39. ANS:
40. ANS:
NBEA VI | NBEA VIA
C
PTS: 1
DIF:
NBEA VIA3f
B
PTS: 1
DIF:
NBEA VIA3b
C
PTS: 1
DIF:
NBEA VI | NBEA VIA | NBEA VIA3c
D
PTS: 1
DIF:
A
PTS: 1
DIF:
C
PTS: 1
DIF:
B
PTS: 1
DIF:
D
PTS: 1
DIF:
B
PTS: 1
DIF:
C
PTS: 1
DIF:
NBEA VIC
B
PTS: 1
DIF:
A
PTS: 1
DIF:
NBEA VIC
C
PTS: 1
DIF:
D
PTS: 1
DIF:
A
PTS: 1
DIF:
1
REF: 236
3
REF: 231
2
REF: 229
2
2
1
1
1
2
2
REF:
REF:
REF:
REF:
REF:
REF:
REF:
1
2
REF: 247
REF: 249
2
2
2
REF: 252
REF: 255
REF: 254
239
236
247
247
248
250
238
MATCHING
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
H
A
B
D
E
J
F
G
I
C
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
1
1
1
1
1
1
1
1
1
1
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
1
1
1
1
1
1
1
1
1
1
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
D
E
B
G
F
C
A
I
H
J
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
1
1
1
1
1
1
1
1
1
1
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
1
1
1
1
1
1
1
1
1
1
NAT: NBEA VI | NBEA VIA
NAT: NBEA VIC