Question 1

Which of the following is true of a collateral note?
A) The collateral cannot consist of stocks or bonds.
B) It is a note secured by a third person's guarantee.
C) It is a note secured by personal property.
D) The collateral cannot consist of some tangible personal property.

Accepted Answer

A collateral note is a note that is secured by personal property. This means that if the borrower defaults on the loan, the lender has the right to take possession of the personal property that was put up as collateral. It is possible for the collateral to consist of tangible personal property, such as a car or jewelry.

Question 2

A _____ is a draft payable on presentation by the payee or holder.
A) time draft
B) coupon draft
C) trade draft
D) sight draft

Accepted Answer

A sight draft is payable on demand or presentation and does not have a specific maturity date, making it a type of demand draft. Time drafts, coupon drafts, and trade drafts are all different types of drafts that have different specifications and terms for payment.

Question 3

An inland draft is one that shows on its face that it is both drawn and payable within the United States.

Accepted Answer

An inland draft is a type of financial instrument that is drawn and payable within the same country, in this case, the United States.

Question 4

A bond with detachable individual coupons representing interest payments is known as a collateral bond.

Accepted Answer

A bond with detachable individual coupons representing interest payments is known as a "bearer bond" or "coupon bond," not a collateral bond.

Question 5

A check that is presented more than six months after its date is commonly called a stale check.

Accepted Answer

This is true. A check presented more than six months after its date is considered stale and may not be accepted by the bank.

Question 6

A _____ bond is a bond payable to a named person.
A) registered
B) coupon
C) special
D) collateral

Accepted Answer

A registered bond is a bond that is payable to a named person, with the owner's name recorded by the issuing company.

Question 7

A check drawn before the time it is dated is a predated check.

Accepted Answer

A check drawn before the time it is dated is called an antedated check, not a predated check.

Question 8

Which of the following best describes a teller's check?
A) It is a check with a voucher attached.
B) It is a check that requires signature and countersignature by its purchaser.
C) It is a check drawn by one bank on another bank.
D) It is a check drawn before the time it is dated.

Accepted Answer

A teller's check is a check drawn by one bank on another bank, often used in transactions where the payee requires a secure form of payment.

Question 9

An acknowledgment by a bank that a sum of money has been received by the bank and a promise by the bank to repay the sum of money is known as a certificate of deposit.

Accepted Answer

A certificate of deposit (CD) is a financial product offered by banks where customers deposit money for a fixed period of time and earn interest on it. The bank issues a certificate to the customer acknowledging the deposit and promising to repay the amount along with the agreed-upon interest at the end of the term.

Question 10

A _____ is a written contract obligation, usually under seal, generally issued by a corporation, a municipality, or a government, that contains a promise to pay a fixed amount of money at a set or determinable future time.
A) bond
B) draft
C) check
D) coupon

Accepted Answer

A bond is a written contract obligation issued by a corporation, a municipality, or a government containing a promise to pay a fixed amount of money at a set or determinable future time. Drafts and checks are documents used for payments, while coupons are typically used for discounts or promotions.

Question 11

A voucher's check is a check drawn by one bank on another bank.

Accepted Answer

A voucher's check, also known as a cashier's check or bank draft, is a check drawn by a bank on itself and guaranteed by the bank to be paid upon presentation. It is not drawn by one bank on another bank.

Question 12

In the case of a time draft, the holder can require payment of the paper before it matures.

Accepted Answer

A time draft is a type of credit document that matures either at a fixed or determinable future time after it is accepted. The holder cannot demand payment before its maturity date.

Question 13

A _____ is an instrument issued by a bank, post office, or express company indicating that the payee may request and receive the amount indicated on the instrument.
A) bond
B) debenture
C) check
D) money order

Accepted Answer

A money order is a prepaid financial instrument issued by a bank, post office, or express company that allows the payee to receive the specified amount.

Question 14

A check can be issued by a post office, bank, and express company.

Accepted Answer

The answer of A check can be issued by a...

Question 15

Explain debentures.

Accepted Answer

The answer of Explain debentures....

Question 16

The drawee's signature alone on the draft is not sufficient to constitute a valid acceptance.

Accepted Answer

The answer of The drawee's signature alone on the draft...

Question 17

Generally, the drawer draws a trade acceptance after the goods are sold.

Accepted Answer

The answer of Generally, the drawer draws a trade acceptance...

Question 18

A secured bond or note issued by a government is called a debenture.

Accepted Answer

A debenture is a type of bond or note issued by a corporation, not a government. Government bonds are often referred to as Treasury bonds or notes.

Question 19

Which of the following is true of a promissory note?
A) It is always considered a negotiable instrument.
B) It acknowledges the existence of the payee.
C) It can be an unwritten promise to pay money.
D) It contains a promise made by the payee.

Accepted Answer

A promissory note acknowledges the existence of the payee, as it is a written promise by the maker to pay a specified sum to the payee.

Question 20

Which of the following best describes a debenture?
A) It is a note secured by mortgage on real estate.
B) It is a secured bond issued by the state government.
C) It is an unsecured bond or note issued by a business firm.
D) It is a note secured by personal property.

Accepted Answer

A debenture is an unsecured bond or note issued by a business firm. It is not secured by any specific asset and is backed only by the general creditworthiness and reputation of the issuing company.

Quiz 22: Promissory Notes and Drafts

Which of the following is true of a collateral note?

A _____ is a draft payable on presentation by the payee or holder.

An inland draft is one that shows on its face that it is both drawn and payable within the United States.

A bond with detachable individual coupons representing interest payments is known as a collateral bond.

A check that is presented more than six months after its date is commonly called a stale check.

A _____ bond is a bond payable to a named person.

A check drawn before the time it is dated is a predated check.

Which of the following best describes a teller's check?

An acknowledgment by a bank that a sum of money has been received by the bank and a promise by the bank to repay the sum of money is known as a certificate of deposit.

A _____ is a written contract obligation, usually under seal, generally issued by a corporation, a municipality, or a government, that contains a promise to pay a fixed amount of money at a set or determinable future time.