CHAPTER 19
Nature and Types of Negotiable Instruments
MULTIPLE-CHOICE QUESTIONS
Circle the letter of the best answer.
1. A check is issued by the
a. maker.
b. payee.
c. drawee.
d. drawer.
2. A promissory note must contain
a. words indicating a promise to pay.
b. mention of an IOU.
c. a certificate of deposit.
d. a date.
3. The signature on a negotiable instrument must
a. be printed or stamped on the instrument.
b. be that of the maker or drawer.
c. appear in the body of the instrument.
d. appear in the lower right-hand corner.
4. A written order by one person on a second person to pay a third person is a
a. promissory note.
b. certificate of deposit.
c. draft.
d. receipt.
5. The omission of the word order or bearer on a promissory note can render it
a. voidable.
b. void.
c. negotiable.
d. nonnegotiable.
6. The term nonnegotiable means
a. void
b. not cash.
c. not readily transferable from one person to another.
d. not payable.
7. An instrument is payable on demand or at a definite time if it is payable
a. at someone’s death.
b. under a certain condition.
c. on, before, or after a specified date.
d. at a bank.
8. A check that contains the words three hundred fifty dollars and the figures $3.50 is
a. payable in the amount of $350.
b. illegal.
c. payable in the amount of $3.50.
d. void.
9. An instrument that is not payable for a fixed amount of money and thus is not negotiable if
a. it is payable in a foreign currency that is a legal currency.
b. it is payable with interest.
c. the amount in figures is omitted.
d. the person required to pay the instrument has the option to pay something in addition to money.
10. A check is
a. a written promise.
b. usually payable at a certain time.
c. payable immediately.
d. not a substitute for cash.
11. Which of the following contains the necessary words of negotiability?
a. Pay to Mary Roe.
b. Please pay Mary Roe.
c. Pay to holder, Mary Roe.
d. Pay to the order of Mary Roe.
12. Brown signed a document unconditionally promising to pay a certain sum of money on a definite day to the order of Nevarez. Nevarez is called the
a. maker.
b. payee.
c. drawer.
d. drawee.
13. A promissory note is not negotiable if it is
a. not dated.
b. payable thirty days after the death of the maker.
c. signed by two people.
d. payable thirty days after the date of the note.
14. A note or check payable in a foreign currency that is a legal currency is
a. nonnegotiable.
b. fully negotiable.
c. not payable in the dollar equivalent of that currency.
d. void.
15. If the day of issue is omitted from a note or check, its negotiability is
a. restricted.
b. voided.
c. not affected.
d. postponed.