QUESTION 1

Transfer of an instrument in such a way that the transferee becomes a holder in due course is which of the following?

A. Negotiation

B. Indorsement

C. Order paper

QUESTION 2

The method used for negotiating commercial paper is determined by which of the following?

A. The type of indorsement on the paper.

B. Whether the payee is an individual or a corporation.

C. Whether the instrument is a draft of promissory note.

D. Whether the instrument is order paper or bearer paper.

QUESTION 3 Assume that Lady GaGa indorsed a check, payable to her, on the reverse side as follows, "Payable to Justin Timberlake, [signed] Lady GaGa". Which of the following describes this indorsement?

A. Blank indorsement

B. Special indorsement

C. Qualified indorsement

D. Restrictive indorsement

QUESTION 4

How could Lady GaGa negotiate the instrument?

A. Indorse and deliver the instrument.

B. Deliver the instrument without indorsing

C. Either indorse and deliver or just deliver

QUESTION 5

Which of the following is not a requirement to become an HDC?

A. Give consideration for the instrument

B. Take in good faith

C. Take without notice of defenses

D. Carefully inspecting the instrument before accepting it to verify it has not been altered

QUESTION 6

Which of the following is a defense that, if known to a holder, will defeat him/her from becoming an HDC?

A. The instrument is overdue

B. The instrument is bearer paper

C. The instrument is indorsed twice