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Exam 15: Banking in the Digital Age

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Question 1

Multiple Choice

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Elmore pays First National Bank $1,000 plus a service fee to draw a check on itself made payable to Go Delivery Service. This is​

A) a cashier's check.
B) an overdraft.
C) a stale check.
D) a stop-payment order.

E) B) and D)
F) A) and D)

Correct Answer

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Question 2

Multiple Choice

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Drew signs a check "pay to the order of Eastern State University" drawn on Drew's account in Fidelity Bank to pay her tuition. Drew is​

A) none of the choices.
B) the drawee.
C) the drawer.
D) the payee.

E) A) and C)
F) A) and D)

Correct Answer

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Question 3

Multiple Choice

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Keanu delivers an instrument to Laura that states 'pay to the order of Laura'. Laura then presents the instrument to MegaBank for payment. This instrument is the most common type of negotiable instrument, which is

Commercial banking practices consider a check that has been outstanding for three months to be a stale check.

A check other than a certified check that is presented for payment more than six months from its date is a stale check.

The Check Clearing in the 21st Century Act (Check 21) applies only in about 75 percent of the states.

Ervin signs a check "pay to the order of Felicia" drawn on Ervin's account in Garden Fields Bank. Ervin later orders the bank not to pay the check, but the bank pays it over Ervin's order. Subsequent checks written on Ervin's account "bounce." Most likely liable for the costs to Ervin is​

Refer to Fact Pattern 15-1. Britney is responsible for​

Smith & Jones Associates is a business customer of Town Bank. Under federal law, Town Bank is not required to provide Smith & Jones with the following

A customer can stop payment on a check that has been certified or accepted by a bank.

Ridgetop Bank creates a paper reproduction of customer Sophie's check with the statement "This is a legal copy of your check. You can use it in the same way you would use the original check." This is​

A bank is not obligated to pay an uncertified check presented more than six months from its date.

Brendan signs a check "pay to the order of City College Bookstore" drawn on his account in Delta Bank to pay for his current semester's textbooks. The bookstore deposits the check in its account in Eagle Bank. This check is

Nick steals two checks from Pauline-a blank check and a check payable to the order of Retail Outlets Company, drawn on Pauline's account with State Bank. Nick forges Pauline's signature on the blank check and makes it payable to himself. Nick forges Retail Outlets's indorsement on the back of the check payable to Retail Outlets, and adds "Pay to the order of Nick." At United Credit Union, Nick indorses the back of both checks with his own name and gives them to United for cash. United does not know about the theft or the forged signatures and presents the checks to State Bank, which pays them. Pauline, who was not negligent, discovers the forgeries and asks State Bank to recredit her account. Who suffers the loss on each check?​

Tomas writes a check for $1,000 drawn on Urban Bank and presents it to Viola. Viola presents the check for payment to Urban Bank, which dishonors it because of insufficient funds. The party most likely liable to Viola is

Gillian writes a check to Harris as payment for a video game player but soon discovers the player is broken. She goes to the drawee bank and orally authorizes Ilene, a bank officer, to stop payment on the check. This order is valid for​

A customer has two days to discover and notify the bank of any error on the monthly statement involving an electronic transfer of funds.

Joni writes Keizer an uncertified check for $500 drawn on Joni's account at Labor Employees Credit Union. Seven months later, Keizer presents the check for payment. The credit union pays the check in good faith without consulting Joni. The credit union​

When a bank pays a check on which the drawer's signature is forged, generally the customer suffers the loss.

Travis signs a check "pay to the order of Umberto" drawn on Travis's account in Valley Bank. Travis has $400 in his account but the amount of the check is $500, which the bank pays. This creates