Understanding Business and Personal Law

Unit 5: Using Your Purchasing Power

Using Your Purchasing Power

1.
Creditors have access to your collateral if you have
A)a secured loan.
B)an unsecured loan.
C)open-ended credit.
D)closed-end credit.
2.
The average family holds
A)two credit cards.
B)six credit cards.
C)thirteen credit cards.
D)twenty credit cards.
3.
When your credit card is lost or stolen, you are responsible for
A)no unauthorized charges made before you notified the credit card company.
B)$500 of any unauthorized charges made before you notified the credit card company.
C)$100 of any unauthorized charges made before you notified the credit card company.
D)$50 of any unauthorized charges made before you notified the credit card company.
4.
Credit card blocking occurs when you
A)haven't paid your credit card bill in two months.
B)rent a hotel room or a car.
C)have exceeded your credit limit.
D)use your card in an ATM machine more than four times during a 24-hour period.
5.
The Fair Credit Reporting Act
A)ensures that both businesses and consumers are given an equal chance to obtain credit.
B)deals with unfavorable reports issued by credit bureaus.
C)allows you to dispute errors made on your credit card bill.
D)makes it illegal for debt collectors to threaten consumers with violence.
6.
There are two basic kinds of negotiable instruments:
A)notes and drafts.
B)notes and CDs.
C)drafts and checks.
D)drafts and bonds.
7.
A demand note is one which is
A)payable when the drawee demands it.
B)paid in a series of payments.
C)paid in one lump sum after one year.
D)payable when the payee demands payment.
8.
A certificate of deposit is a
A)draft provided by a bank.
B)note provided by a bank.
C)demand draft.
D)bill of exchange.
9.
Drafts involve three parties:
A)the drawer, the drawee and the maker.
B)the drawer, the maker, and the payee.
C)the drawer, the drawee, and the acceptor.
D)the drawer, the maker, and the acceptor.
10.
An instrument payable "thirty days after sight" is called a
A)definite-time paper.
B)demand paper.
C)paper with controlling words.
D)unconditional promise order.
11.
The parties to a check are the same as the parties to a draft except that the
A)payer is always the bank.
B)drawer is always the bank.
C)payee is always the bank.
D)drawer is always the bank.
12.
On a check, if there is a difference between the figures and the words
A)the bank will honor the written amount.
B)the bank will honor the amount in figures.
C)the bank will not honor the check.
D)the bank will ask the drawer to interpret which amount is correct.
13.
A bad check is one that
A)is signed by someone other than the drawer.
B)is drawn on an account in which you have insufficient funds.
C)the bank is liable for any loss that you might suffer.
D)the bank deems too old to honor.
14.
When an offeror deliberately submits a forged check to another, the resulting crime is called
A)negligence.
B)repossession.
C)uttering.
D)forgery.
15.
A debit card offers you
A)limited liability within the first 60 days of use.
B)less legal protection than a credit card.
C)more legal protection than a credit card.
D)limited liability after the first 60 days of use.
16.
Order paper may be negotiated by
A)assigning it to a payee.
B)the drawer transferring it to the payee.
C)placing one's signature on the back.
D)delivery alone.
17.
Bearer paper may be negotiated by
A)the payee indorsing it.
B)the drawer transferring it to the payee.
C)placing one's signature on the back.
D)delivery alone.
18.
On the back of a check, the first inch and one half from the trailing edge of the check is reserved for
A)the payee's indorsement.
B)the depository bank's indorsement.
C)the payor's indorsement.
D)the maker's indorsement.
19.
Anyone who pays an instrument on which there is a forged indorsement
A)is liable to the true owner for the amount of the instrument.
B)acquires title but is not a holder.
C)must issue a stop-payment order.
D)receives consideration for the instrument.
20.
Electronic signatures
A)are not legal.
B)carry full legal weight.
C)are less risky than traditional signatures.
D)must follow federal guidelines for verification.
21.
A holder in due course is a holder who
A)accepts a properly negotiated instrument.
B)takes an instrument for value, in good faith, and without notice.
C)is found with a fraud in the inducement.
D)accepts all liability for the paying of the instrument.
22.
When someone uses fraud to persuade another to enter into a contract it is called
A)fraud in the inducement.
B)a breach of contract.
C)fraud in the lack of consideration.
D)a failure of consideration.
23.
Real defenses include
A)breach of contract and lack of delivery.
B)breach of contract and lack of consideration.
C)mental incompetence and duress.
D)mental incompetence and fraud in the inducement.
24.
Primary liability is a(n)
A)absolute liability to pay.
B)liability to pay when certain conditions are met.
C)liability in good faith.
D)liability to the holder in due course.
25.
Two types of parties are secondarily liable on negotiable instruments:
A)the drawer of the draft and the indorsers of the note.
B)the payee of the draft and the acceptor of the note.
C)the primary party and the holder in due course.
D)the drawer of the draft and the indorsers of either a note or a draft.
26.
Closed-end credit is credit given for a specific amount of money.
A)TRUE
B)FALSE
27.
Your name, address, birth date, and social security number are all considered collateral when completing the loan application.
A)TRUE
B)FALSE
28.
If you have too much credit card debt, the only way out is to declare bankruptcy.
A)TRUE
B)FALSE
29.
You have the right to see your own credit report and correct errors that may be contained in the report.
A)TRUE
B)FALSE
30.
You have 25 days to inform your creditor that an error has been made on your credit card bill.
A)TRUE
B)FALSE
31.
When two persons sign a note, they are known as copayees.
A)TRUE
B)FALSE
32.
A time draft is payable as soon as it is presented to the drawer for payment.
A)TRUE
B)FALSE
33.
A check is the most common kind of draft in use today.
A)TRUE
B)FALSE
34.
For an instrument to be negotiable, it must be either typed or handwritten in pen.
A)TRUE
B)FALSE
35.
The omission of the date does not affect the negotiability of an instrument.
A)TRUE
B)FALSE
36.
If you make a mistake when writing a check, cross out the mistake and make the correction.
A)TRUE
B)FALSE
37.
Writing a check on an account with insufficient funds is larceny or attempted larceny, unless it is accidental.
A)TRUE
B)FALSE
38.
Overdraft protection prevents most forged checks.
A)TRUE
B)FALSE
39.
When involved in a business transaction with a stranger, request a certified check.
A)TRUE
B)FALSE
40.
Regulation CC provides for banks to disclose in advance their policy for making funds available to depositors.
A)TRUE
B)FALSE
41.
Negotiation is the transfer of your rights under a contract to someone else.
A)TRUE
B)FALSE
42.
When an instrument is properly negotiated, the one who receives it can legally collect payment on it.
A)TRUE
B)FALSE
43.
A blank indorsement consists of nothing written on the back of the check.
A)TRUE
B)FALSE
44.
"For deposit only" is an example of a qualified indorsement.
A)TRUE
B)FALSE
45.
To encourage people to accept negotiable instruments from others, a system of implied warranties is part of the law of negotiable instruments.
A)TRUE
B)FALSE
46.
A holder in due course must first be a holder.
A)TRUE
B)FALSE
47.
Personal defenses can be used against holders in due course.
A)TRUE
B)FALSE
48.
Real defenses can be used against holders in due course.
A)TRUE
B)FALSE
49.
Two parties have primary liability: the maker of the note and the holder in due course.
A)TRUE
B)FALSE
50.
A demand made by a holder to pay or accept an instrument is called a presentment.
A)TRUE
B)FALSE
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