QUESTION 1 Thelma signs a check pay to the order of Uri drawn on Thelma's account in Verity Bank Thelma has $400 in her account but the amount of the check is $500, which the bank pays This is A a dishonored check B an overdraft C a stale check D a postdated check QUESTION 2 The payment of Brian's debt to Chuck is guaranteed by Brian's personal property This is A a suretyship agreement B a reorganization C a violation of most state laws D a secured transaction QUESTION 3 County Bank wants to perfect its security interest in collateral owned by Direct Sales Company Most likely, a financing statement should be filed with A the federal loan officer B the county clerk C the local chamber of commerce D the secretary of state's office QUESTION 4 Fact Pattern 23 2 Tom draws a check, on his account in State Bank in New York, payable to Digital Media, Inc , in San Francisco Digital deposits the check in its account at First National Bank First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York That Federal Reserve Bank sends the check to State Bank Refer to Fact Pattern 23 2 When Digital's bank received the check, it was required to pass it on A before midnight of the next day, even if it was not a banking day B within five business days C before midnight of the next banking day D before noon of the next banking day QUESTION 5 Fact Pattern 23 2 Tom draws a check, on his account in State Bank in New York, payable to Digital Media, Inc , in San Francisco Digital deposits the check in its account at First National Bank First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York That Federal Reserve Bank sends the check to State Bank Refer to Fact Pattern 23 2 Tom's bank is A the intermediary bank B the payor bank ' C the depositary bank D the cashing bank QUESTION 6 Fact Pattern 23 2 Tom draws a check, on his account in State Bank in New York, payable to Digital Media, Inc , in San Francisco Digital deposits the check in its account at First National Bank First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York That Federal Reserve Bank sends the check to State Bank Refer to Fact Pattern 23 2 Digital's bank is A the intermediary bank B the cashing bank C the payor bank D the depositary bank QUESTION 7 Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment With respect to this note, Mia is A an ordinary holder in due course B a knowledgeable holder in due course C an ordinary holder D an ordinary note taker QUESTION 8 On the back of a check payable to Nero, he writes Pay to Odell, without recourse and signs it This A relieves Nero of liability on the check B does not effect the check's negotiability or any party's liability C renders the check nonnegotiable D relieves Odell of liability on the check QUESTION 9 Quotient Financial Corporation is a secured party with a security interest in property owned by Retail Sales Company Perfection of this security interest may not protect Quotient Financial against the claim of A a bank B a trustee in bankruptcy C a buyer in the ordinary course of business D a subsequent lien creditor QUESTION 10 Trudy forges Uma's signature on a check payable to the order of Trudy drawn on Uma's account in Verity Bank Most likely, if the bank pays the check A the loss will be apportioned among all of Verity's customers B the Federal Reserve will reimburse all parties for their costs C Verity will have to recredit Uma's account D Uma will be liable for the amount QUESTION 11 The payment of Frida's debt to Gianini is guaranteed by Frida's personal property Gianini is A a debtor B a secured party C a secured transaction D a security interest QUESTION 12 Idle Investments, Inc , and Harbor Bank are secured parties with security interests in property owned by GR8 Manufacturing Corporation Priority between these security interests is generally determined by A the time of perfection B the time the security agreement was signed C the custom in the trade D the amount of the claim QUESTION 13 Vera gives Willy a $500 check as payment for a debt Willy crudely raises the amount of the check to $5,000 and transfers it to Xtreem Sportz store for a new bike Xtreem deposits the check in its Yankee Bank account Vera is liable for the payment of $5,000 to A Xtreem Sportz and Yankee Bank only B no one C Willy, Xtreem Sportz, and Yankee Bank D Willy only QUESTION 14 The payment of Eden's debt to Flem is guaranteed by Eden's personal property This property is A a secured party B a security interest C collateral D a secured transaction QUESTION 15 To finance the purchase of a car from Giant Auto Sales, Hoppy signs an instrument promising to pay to Ideal Credit Union $18,000 with interest in installments with the final payment due May 15, 2014 To be negotiable, this instrument must include on its face A any conditions to the repayment of the loan B no conditions C any conditions on the sale of the car D any conditions to the disbursement of the funds QUESTION 16 To finance the purchase of a house from Tuna, Uri signs an instrument promising to pay to Verity Mortgage Service $160,000 with interest in installments with the final payment due July 10, 2040 To be negotiable, this instrument must include the signature of A Verity's chief financial officer B a non party witness C Tuna or Tuna's realtor D Uri QUESTION 17 Olaf is the creditor in a transaction with Phil Once certain requirements are met, Olaf's rights will attach , which means that Olaf will have A an indivisible ownership right to Phil's property B an enforceable security interest in Phil's property C the permission of a court to seize Phil's property D a notice affixed to Phil's property QUESTION 18 To pay for a new desk bought at Office Outlet, Pete makes a check payable to Offs Outlet A proper indorsement of the check is A Pete only B Office Outlet only C Office Outlet or Offs Outlet D Offs Outlet only QUESTION 19 Middling Credit Corporation asks Little Supply Company to agree to a security agreement that provides for coverage of the proceeds from the sale of after acquired property This is A a first in, first out rule B a funds guaranty C in violation of secured transactions law D a floating lien QUESTION 20 Dora writes a check for $100 drawn on Eastern Bank and presents it to Fast Cash, Inc , for payment If the check is not backed by sufficient funds, Dora may be prosecuted for A robbery B forgery C fraud D negligence QUESTION 21 Steve steals one of Tricia's checks and forges her signature Tricia's bank, Unity Bank, pays the check Tricia can recover from A no one B Steve, but not Unity Bank C Unity Bank, which cannot recover from Steve D Unity Bank, which can recover from Steve QUESTION 22 GR8 Products, Inc , warrants its goods to be free of defects If Heck issues an instrument to obtain goods from GR8 and the goods prove to be defective, Heck can avoid paying on the instrument A only if it is a note B only if it is a check C under no circumstances D whether it is a check or a note QUESTION 23 Fact Pattern 22 1 Ewa signs an instrument unconditionally promising to pay to First State Bank $5,000 with interest in installments with the final payment due June 1, 2012 Refer to Fact Pattern 22 1 The instrument that Ewa signed is most likely A an order to pay B a draft C a promissory note D a certificate of deposit QUESTION 24 Fact Pattern 22 1 Ewa signs an instrument unconditionally promising to pay to First State Bank $5,000 with interest in installments with the final payment due June 1, 2012 Refer to Fact Pattern 22 1 With respect to this instrument, First States Bank is A the drawee B the payee C the drawer D the maker QUESTION 25 Fact Pattern 24 2 General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from Helpful Finance Corporation for a security interest in the equipment The next day, GLC borrows $513,000 from Interstate Bank, also for a security interest in the equipment GLC defaults on the loans Refer to Fact Pattern 24 2 Suppose that two weeks after GLC takes possession of the equipment, Helpful and Interstate file financing statements, with Interstate filing first In that circumstance, the party with priority to the equipment is A GLC B Interstate only C Helpful and Interstate proportionately D Helpful only QUESTION 26 Fact Pattern 24 2 General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from Helpful Finance Corporation for a security interest in the equipment The next day, GLC borrows $513,000 from Interstate Bank, also for a security interest in the equipment GLC defaults on the loans Refer to Fact Pattern 24 2 Suppose that Helpful perfects its security interest when GLC takes possession of the equipment In that circumstance, the party with priority to the collateral on GLC's default would be A GLC B Interstate only C Helpful and Interstate proportionately D Helpful only QUESTION 27 City Bank's financing statement in collateral owned by Delta Waters Corporation will expire in less than a year Filed timely, a continuation statement could extend the effectiveness of the financing statement for A ten years B one year C two years D five years QUESTION 28 The payment of Nero's debt to Olly is guaranteed by Nero's personal property Nero is located in Pennsylvania Olly communicates to the appropriate state official a security agreement that uses only Quality Engineering, the trade name of Nero's business To perfect Olly's interest, this is A sufficient if Quality Engineering is a sole proprietorship B not sufficient C irrelevant D sufficient if the trade name is spelled correctly or misspelled slightly QUESTION 29 The payment of John's debt to Kirsten is guaranteed by John's personal property Kirsten is most likely to perfect her interest by A calculating the precise amount of John's debt B attaching a bright label to John's property C correcting grammatical errors in the parties' written agreement D filing a financing statement with the appropriate authority QUESTION 30 Fact Pattern 22 2 Jake is the maker of a $2,000 promissory note payable to Kim Kim indorses the note to Lou who, in turn, indorses it to Mona, who then indorses it to Nat, the present holder Refer to Fact Pattern 22 2 Nat properly presents the note to Jake for payment, but Jake refushes to pay and defaults on it With timely notice to the proper parties, Nat may collect payment on the note from A Kim, Lou, or Mona B Mona only C Kim or Lou only D no one

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QUESTION 1 Thelma signs a check pay to the order of Uri drawn on Thelma's account in Verity Bank. Thelma has $400 in her account

QUESTION 1

Thelma signs a check "pay to the order of Uri" drawn on Thelma's account in Verity Bank. Thelma has $400 in her account but the amount of the check is $500, which the bank pays. This is

A.a dishonored check

B.an overdraft.

C.a stale check.

D.a postdated check.

QUESTION 2

The payment of Brian's debt to Chuck is guaranteed by Brian's personal property. This is

A.a suretyship agreement.

B.a reorganization.

C.a violation of most state laws

.D.a secured transaction.

QUESTION 3

County Bank wants to perfect its security interest in collateral owned by Direct Sales Company. Most likely, a financing statement should be filed with

A.the federal loan officer.

B.the county clerk.

C.the local chamber of commerce.

D.the secretary of state's office.

QUESTION 4

Fact Pattern 23-2
Tom draws a check, on his account in State Bank in New York, payable to Digital Media, Inc., in San Francisco. Digital deposits the check in its account at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve Bank sends the check to State Bank.

Refer to Fact Pattern 23-2. When Digital's bank received the check, it was required to pass it on

A.before midnight of the next day, even if it was not a "banking" day.

B.within five business days.

C.before midnight of the next banking day.

D.before noon of the next banking day.

QUESTION 5

Fact Pattern 23-2
Tom draws a check, on his account in State Bank in New York, payable to Digital Media, Inc., in San Francisco. Digital deposits the check in its account at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve Bank sends the check to State Bank.

Refer to Fact Pattern 23-2. Tom's bank is

A.the intermediary bank.

B.the payor bank.'

C.the depositary bank

.D.the cashing bank.

QUESTION 6

Fact Pattern 23-2
Tom draws a check, on his account in State Bank in New York, payable to Digital Media, Inc., in San Francisco. Digital deposits the check in its account at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve Bank sends the check to State Bank.

Refer to Fact Pattern 23-2. Digital's bank is

A.the intermediary bank.

B.the cashing bank.

C.the payor bank.

D.the depositary bank.

QUESTION 7

Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment. With respect to this note, Mia is

A.an ordinary holder in due course.

B.a knowledgeable holder in due course.

C.an ordinary holder.

D.an ordinary note taker.

QUESTION 8

On the back of a check payable to Nero, he writes "Pay to Odell, without recourse" and signs it. This

A.relieves Nero of liability on the check.

B.does not effect the check's negotiability or any party's liability.

C.renders the check nonnegotiable.

D.relieves Odell of liability on the check.

QUESTION 9

Quotient Financial Corporation is a secured party with a security interest in property owned by Retail Sales Company. Perfection of this security interest may not protect Quotient Financial against the claim of

A.a bank.

B.a trustee in bankruptcy.

C.a buyer in the ordinary course of business.

D.a subsequent lien creditor.

QUESTION 10

Trudy forges Uma's signature on a check "payable to the order of Trudy" drawn on Uma's account in Verity Bank. Most likely, if the bank pays the check

A.the loss will be apportioned among all of Verity's customers.

B.the Federal Reserve will reimburse all parties for their costs.

C.Verity will have to recredit Uma's account.

D.Uma will be liable for the amount.

QUESTION 11

The payment of Frida's debt to Gianini is guaranteed by Frida's personal property. Gianini is

A.a debtor.

B.a secured party.

C.a secured transaction.

D.a security interest.

QUESTION 12

Idle Investments, Inc., and Harbor Bank are secured parties with security interests in property owned by GR8 Manufacturing Corporation. Priority between these security interests is generally determined by

A.the time of perfection.

B.the time the security agreement was signed.

C.the custom in the trade.

D.the amount of the claim.

QUESTION 13

Vera gives Willy a $500 check as payment for a debt. Willy crudely raises the amount of the check to $5,000 and transfers it to Xtreem Sportz store for a new bike. Xtreem deposits the check in its Yankee Bank account. Vera is liable for the payment of $5,000 to

A.Xtreem Sportz and Yankee Bank only.

B.no one

.C.Willy, Xtreem Sportz, and Yankee Bank.

D.Willy only

QUESTION 14

The payment of Eden's debt to Flem is guaranteed by Eden's personal property. This property is

A.a secured party.

B.a security interest.

C.collateral.

D.a secured transaction.

QUESTION 15

To finance the purchase of a car from Giant Auto Sales, Hoppy signs an instrument promising to pay to "Ideal Credit Union" $18,000 with interest in installments with the final payment due May 15, 2014. To be negotiable, this instrument must include on its face

A.any conditions to the repayment of the loan.

B.no conditions.

C.any conditions on the sale of the car.

D.any conditions to the disbursement of the funds.

QUESTION 16

To finance the purchase of a house from Tuna, Uri signs an instrument promising to pay to "Verity Mortgage Service" $160,000 with interest in installments with the final payment due July 10, 2040. To be negotiable, this instrument must include the signature of

A.Verity's chief financial officer.

B.a non-party witness.

C.Tuna or Tuna's realtor.

D.Uri.

QUESTION 17

Olaf is the creditor in a transaction with Phil. Once certain requirements are met, Olaf's rights willattach, which means that Olaf will have

A.an indivisible ownership right to Phil's property.

B.an enforceable security interest in Phil's property.

C.the permission of a court to seize Phil's property.

D.a notice affixed to Phil's property.

QUESTION 18

To pay for a new desk bought at Office Outlet, Pete makes a check payable to "Offs Outlet." A proper indorsement of the check is

A."Pete" only.

B."Office Outlet" only.

C."Office Outlet" or "Offs Outlet."

D."Offs Outlet" only.

QUESTION 19

Middling Credit Corporation asks Little Supply Company to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired property. This is

A.a first-in, first-out rule.

B.a funds guaranty.

C.in violation of secured transactions law.

D.a floating lien.

QUESTION 20

Dora writes a check for $100 drawn on Eastern Bank and presents it to Fast Cash, Inc., for payment. If the check is not backed by sufficient funds, Dora may be prosecuted for

A.robbery.

B.forgery.

C.fraud.

D.negligence.

QUESTION 21

Steve steals one of Tricia's checks and forges her signature. Tricia's bank, Unity Bank, pays the check. Tricia can recover from

A.no one

.B.Steve, but not Unity Bank.

C.Unity Bank, which cannot recover from Steve

.D.Unity Bank, which can recover from Steve.

QUESTION 22

GR8 Products, Inc., warrants its goods to be free of defects. If Heck issues an instrument to obtain goods from GR8 and the goods prove to be defective, Heck can avoid paying on the instrument

A.only if it is a note.

B.only if it is a check.

C.under no circumstances.

D.whether it is a check or a note.

QUESTION 23

Fact Pattern 22-1

Ewa signs an instrument unconditionally promising to pay to "First State Bank" $5,000 with interest in installments with the final payment due June 1, 2012.

Refer to Fact Pattern 22-1. The instrument that Ewa signed is most likely

A.an order to pay.

B.a draft.

C.a promissory note.

D.a certificate of deposit.

QUESTION 24

Fact Pattern 22-1

Ewa signs an instrument unconditionally promising to pay to "First State Bank" $5,000 with interest in installments with the final payment due June 1, 2012.

Refer to Fact Pattern 22-1. With respect to this instrument, First States Bank is

A.the drawee.

B.the payee.

C.the drawer.

D.the maker.

QUESTION 25

Fact Pattern 24-2

General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from Helpful Finance Corporation for a security interest in the equipment. The next day, GLC borrows $513,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on the loans.

Refer to Fact Pattern 24-2. Suppose that two weeks after GLC takes possession of the equipment, Helpful and Interstate file financing statements, with Interstate filing first. In that circumstance, the party with priority to the equipment is

A.GLC.

B.Interstate only.

C.Helpful and Interstate proportionately.

D.Helpful only.

QUESTION 26

Fact Pattern 24-2

Refer to Fact Pattern 24-2. Suppose that Helpful perfects its security interest when GLC takes possession of the equipment. In that circumstance, the party with priority to the collateral on GLC's default would be

A.GLC.

B.Interstate only.

C.Helpful and Interstate proportionately

.D.Helpful only.

QUESTION 27

City Bank's financing statement in collateral owned by Delta Waters Corporation will expire in less than a year. Filed timely, a continuation statement could extend the effectiveness of the financing statement for

A.ten years.

B.one year.

C.two years.

D.five years.

QUESTION 28

The payment of Nero's debt to Olly is guaranteed by Nero's personal property. Nero is located in Pennsylvania. Olly communicates to the appropriate state official a security agreement that uses only Quality Engineering, the trade name of Nero's business. To perfect Olly's interest, this is

A.sufficient if Quality Engineering is a sole proprietorship.

B.not sufficient.

C.irrelevant.

D.sufficient if the trade name is spelled correctly or misspelled slightly.

QUESTION 29

The payment of John's debt to Kirsten is guaranteed by John's personal property. Kirsten is most likely toperfecther interest by

A.calculating the precise amount of John's debt.

B.attaching a bright label to John's property.

C.correcting grammatical errors in the parties' written agreement.

D.filing a financing statement with the appropriate authority.

QUESTION 30

Fact Pattern 22-2

Jake is the maker of a $2,000 promissory note payable to Kim. Kim indorses the note to Lou who, in turn, indorses it to Mona, who then indorses it to Nat, the present holder.

Refer to Fact Pattern 22-2. Nat properly presents the note to Jake for payment, but Jake refushes to pay and defaults on it. With timely notice to the proper parties, Nat may collect payment on the note from

A.Kim, Lou, or Mona.

B.Mona only.

C.Kim or Lou only

.D.no one.