1. Martha makes out a note for $100 in such a way that Tracey is able to alter it to read $10,000. Tracey negotiates the note to Katherine, who qualifies as a holder in due course. Assuming Martha did not act in a negligent manner, which of the following statements is true?

Multiple Choice

Based on the alteration, Katherine cannot collect anything from Martha, but she can collect $100 from Tracey.

Based on an alteration, Katherine cannot collect anything from either Martha or Tracey.

Katherine may only collect $100 from Martha.

Katherine can collect $10,000 from Martha.

2.

Grandfather lends $5,000 to Grandson for college expenses receiving a promissory note for $5,000 plus interest from Grandson in return. In tidying up, Grandfather accidentally destroyed the promissory note. Which of the following is true regarding the rights of Grandfather to repayment of the note, if any?

Multiple Choice

• Grandfather may still enforce the promissory note but is not entitled to any interest amounts on it.

• Grandfather may enforce the promissory note only if Grandson has made at least one payment on it because a payment on the promissory note establishes the validity of the note.

• Because the promissory note was destroyed, it is considered discharged by cancellation, and grandfather is no longer legally entitled to payment.

• Grandfather may still enforce the promissory note if he can prove that the instrument existed and that he was its holder when it was destroyed

3.

Bob Smith receives a check made payable to him. Sally steals the check and indorses it "Bob Smith" on the back of the check and cashes it at ABC Check Cashing which had no notice of the forgery. What is the status of ABC Check Cashing?

Multiple Choice

• It is a holder but not a holder in due course.

• It is both a holder and a holder in due course.

• It is neither a holder nor a holder in due course.

• It is a holder in due course but not a holder.

4.

Dylan indorsed a check from his employer by signing his (Dylan's) name and the words "without recourse." This indorsement:

Multiple Choice

• is an example of a blank indorsement.

• is an example of a qualified indorsement.

• is an example of a special indorsement.

• is an example of an indorsement that destroys negotiability.

5. Sally is a holder in due course of a promissory note signed by Bill. Bill wants to avoid paying Sally by claiming a failure of consideration in regard to the transaction with Alice in which the negotiable instrument was initially issued. Which of the following is true regarding that defense?

Multiple Choice

• Lack of consideration is a real defense which may be asserted against a holder in due course such as Sally.

• Lack of consideration is a personal defense which may be asserted against a holder in due course such as Sally.

• Lack of consideration is a personal defense which may not be asserted against a holder in due course such as Sally.

• Lack of consideration is a real defense which may not be asserted against a holder in due course such as Sally.