The transfer of a negotiable instrument by a person other than the issuer to a person who thereby becomes a holder is referred to as a(n) ________.

A. insurance B. negotiation C. indorsement D. assignment

Which of the following is a similarity between bearer paper and order paper?

A. both require indorsements to be considered negotiable B. both can be claimed by whoever presents the instrument for payment C. both require a specific payee to be named D. both require delivery to be considered negotiable

An indorsement that does not specify a particular indorsee is known as a ________.

A. blank indorsement B. restrictive indorsement C. special indorsement D. qualified indorsement

An indorsement whereby the indorser promises to pay the holder or any subsequent indorser the amount of the instrument if the maker, drawer, or acceptor defaults is referred to as a(n) ________.

A. qualified indorsement B. unqualified indorsement C. competent indorsement D. promissory indorsement

Under the Uniform Commercial Code's ________ requirement, a person cannot qualify as a holder in due course (HDC) if he or she has noticed that the instrument is overdue.

A. no evidence of forgery, alteration, or irregularity B. taking in good faith C. taking for value D. taking without notice of defect

Which of the following requirements has to be met for a holder to qualify as a holder in due course (HDC) under the shelter principle?

A. The holder must not be in possession of a prior negotiable instrument. B. The holder must have notice of a defense or claim against the payment of the instrument. C. The holder must have been a party to a fraud or an illegality affecting the instrument. D. The holder must have acquired the instrument from an HDC.

Order paper is negotiated by:

A. indorsement alone. B. delivery alone. C. either delivery or indorsement. D. transfer of possession and indorsement.

If Aubree indorses a check "without recourse":

A. Aubree is not contractually liable if the check is not paid. B. negotiability is destroyed. C. the check cannot be transferred. D. Aubree cannot transfer good title to the check.

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Which of the following is required regarding indorsements?

A. An indorsement must be written on the back side of the instrument. B. There must be compliance with Federal Reserve Board guidelines in order for the instrument to be negotiable. C. An indorsement must be written on the instrument or on a paper affixed to the instrument. D. An indorsement must be dated.

All of the following are "real defenses" except a:

A. note made by a minor. B. check written while a gun is held to the drawer's head. C. note given in exchange for worthless securities. D. check fraudulently changed from $100 to $400.

John buys a new car with the help of a loan. He permits the creditor to take possession of the car if he cannot repay the loan in time. Here, the car is the ________.

A. after-acquired property B. collateral C. intangible personal property D. floating lien

________ is a written document signed by a debtor that creates a security interest in personal property.

A. license B. lease agreement C. security agreement D. chattel paperAnswer

Which of the following is considered intangible personal property? A. vehicles

B. equipment C. accessions D. deposit accounts

A(n) ________ refers to a security interest in property that was not in the possession of the debtor when the security agreement was executed.

A. floating lien B. after-acquired property C. attachment D. future advance Answer Key: A

_______ is a process that establishes the right of a secured creditor against other creditors who claim an interest in the collateral.

A. Disposition of collateral B. Retention of collateral C. Perfection of a security interest D. Repossession of a security interest

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A ________ is a document filed by a secured creditor with the appropriate government office that constructively notifies the world of his or her security interest in personal property.

A. security disclosure B. financing statement C. possession statement D. custodial statement

Which of the following is true of perfection by possession of collateral?

A. A creditor cannot take possession of the collateral until a financing statement is filed.

B. No financing statement has to be filed if the creditor has physical possession of the collateral.

C. A debtor cannot acquire security against the collateral without filing a financing statement.

D. A financing statement can be filed only against intangible personal property placed as collateral.

Perfection ________ is a situation where the creditor does not have to file a financing statement or take possession of the goods to perfect a security interest.

A. by possession of collateral B. by attachment C. by claim D. without statement

Which of the following is true of the priority of claims?

A. If two or more secured parties claim an interest in the same collateral but only one has perfected his or her security interest, the perfected security interest has priority.

B. Although one of the parties to claim an interest in the collateral has perfected his or her security interest, all the parties are given fair and equal priority.

C. If two or more secured parties claim an interest in the same collateral but neither has a perfected claim, they are given equal priority irrespective of attachments.

D. If two or more secured parties claim an interest in the same collateral but neither has a perfected claim, the first to claim has priority.

Darrel, Smith, Keith, and Aaron are claimants to a collateral interest. Smith and Darrel secure their interests. Aaron takes physical possession of the collateral. Keith files a financing statement some time later. Who among the four will have highest priority of claim to the collateral?

A. Darrel

B. Smith

C. Keith

D. Aaron