Question 1

The Federal Reserve System acts as a clearinghouse where banks exchange checks.

Accepted Answer

The Federal Reserve System operates a nationwide network of check-clearing facilities. This helps facilitate the exchange of checks between banks and helps to ensure that funds move in a secure and efficient manner.

Question 2

The first bank to receive a check for payment is the depositary bank.

Accepted Answer

The depositary bank is the bank where the person or company receiving the payment has their account and deposits the check. The check is processed through the depositary bank and then forwarded to other banks for payment.

Question 3

Rikki signs a check "pay to the order of Scholar University" drawn on Rikki's account in Town Bank to pay her tuition. Rikki is
A) the certifier.
B) the drawee.
C) the drawer.
D) the payee.

Accepted Answer

Rikki is writing the check and therefore is the drawer, while Scholar University is the payee. The drawee would be Town Bank, as it is the financial institution where Rikki's account is held and from which the funds will be withdrawn. The certifier would be someone who guarantees that the funds are available in Rikki's account, but there is no indication that this is the case in this scenario.

Question 4

A bank cannot recover from a party who cashes a check bearing a forged drawer's signature once the bank has accepted and paid the item.

Accepted Answer

The answer of A bank cannot recover from a party...

Question 5

A point-of-sale system is a type of electronic fund transfer system.

Accepted Answer

A point-of-sale system is a type of electronic fund transfer system that allows customers to make payments using their debit or credit cards. It transfers funds electronically from the customer’s account to the merchant's account.

Question 6

Albert buys a surround sound system from his neighbor George at George's garage sale. Albert writes George a check for $250 for the sound system. George is
A) the certifier.
B) the drawee.
C) the drawer.
D) the payee.

Accepted Answer

George is the payee because he is receiving the payment for the sound system sold.

Question 7

Scott presents an instrument that states "pay to the order of Scott" to Town Bank for payment. This instrument is the most common type of negotiable instrument, which is
A) a commercial wire transfer.
B) a check.
C) a note.
D) a substitute check.

Accepted Answer

The given instrument, which states "pay to the order of Scott," is a check, which is the most common type of negotiable instrument. A commercial wire transfer is not a negotiable instrument but an electronic means of transferring funds. A note is a written promise to pay a specific amount of money, and a substitute check is a digital copy of a physical check.

Question 8

A check can be retained at its place of deposit and only its image can be presented for payment under an electronic presentment agreement.

Accepted Answer

When a check is deposited through electronic means, such as through a mobile app or online banking, the financial institution may retain the physical check but only present an image of the check for payment. This is known as electronic presentment and is a common practice in the banking industry.

Question 9

A forged indorsement does not transfer title.

Accepted Answer

A forged indorsement is not valid and therefore cannot legally transfer title.

Question 10

Ian buys a cell phone in Jiffy Mart, using the means that accounts for more retail payments than any other. This means of payment is
A) a commercial check.
B) a debit card.
C) a personal check.
D) a cash.

Accepted Answer

According to statistics, debit cards account for more retail payments than any other means, therefore it is the best choice. Commercial checks and personal checks are less common nowadays, and cash is not as convenient as using a card.

Question 11

Gaining unauthorized access to an electronic fund transfer system is a felony.

Accepted Answer

Gaining unauthorized access to an electronic fund transfer system is considered a federal crime and is punishable as a felony under the Computer Fraud and Abuse Act (CFAA) in the United States.

Question 12

Under the Check Clearing in the 21st Century Act, a bank has to credit a customer's account as soon as the bank receives the funds.

Accepted Answer

According to the Check Clearing in the 21st Century Act, also known as Check 21, a bank must provide provisional credit to the customer's account as soon as it receives the funds from the check, even if the physical check has not yet been received. This is known as "substitute check" and is considered legal equivalent of an original check.

Question 13

Kris presents an instrument that states "pay to the order of Kris" to Metro Bank for payment. This is a special type of draft drawn on a bank, ordering the bank to pay a fixed amount of money on demand. This is
A) a commercial wire transfer.
B) a check.
C) a debit card transaction receipt.
D) a cash transaction

Accepted Answer

The description given matches that of a check, which is a written order from an account holder to their bank to pay a specified sum of money to the bearer or named recipient.

Question 14

A bank that encodes information on an item after its issue warrants to any subsequent bank that the information is correct.

Accepted Answer

This refers to the concept of "warranties" in banking, whereby a bank provides assurances to other banks regarding the accuracy of information related to checks or other financial instruments. When a bank encodes information on an item (such as a check), it is warranting that the information is correct and can be relied upon by subsequent banks in the check clearing process.

Question 15

A customer has sixty days from the date of receipt of a statement of an electronic transfer to notify the financial institution of any errors.

Accepted Answer

According to the Electronic Fund Transfer Act, a customer has sixty days from the date of receipt of a statement of an electronic transfer to notify the financial institution of any errors.

Question 16

Stored-value cards are a form of digital cash.

Accepted Answer

Stored-value cards are a type of electronic payment system that allows the user to deposit and withdraw money from a digital account or card. The value stored on the card can be used for purchases or transactions, making it a form of digital cash.

Question 17

Each bank in a collection chain must pass a check on before noon of the day of its receipt.

Accepted Answer

The answer of Each bank in a collection chain must...

Question 18

Today, most checks are processed manually.

Accepted Answer

Most checks are now processed electronically through methods such as remote deposit capture and electronic funds transfer.

Question 19

If a customer's debit card is lost or stolen, the customer will not be liable for any unauthorized use of the card.

Accepted Answer

The answer of If a customer's debit card is lost...

Question 20

A customer must examine a bank statement and report any discovered forged signature to recover from the bank for the forgery.

Accepted Answer

If a customer discovers a forged signature on their bank statement, they should report it to the bank immediately to begin the recovery process. The bank may require the customer to provide documentation or fill out forms, but ultimately, the responsibility for covering losses due to forgery falls on the bank.

Quiz 19: Checks and Banking in the Digital Age