CHAPTER 22
Checks, The Banking System, and E-Money
MULTIPLE-CHOICE QUESTIONS
On the line next to each statement, write the letter of the best answer.
1. A written stop-payment order is effective for
a. fourteen days.
b. seven days.
c. six months.
d. ninety days.
2. A check that a bank draws on its own funds, payable to a certain party, is a
a. cashier’s check.
b. certified check.
c. personal check.
d. money order.
3. A personal check that a bank guarantees to pay is a
a. cashier’s check.
b. money order.
c. certified check.
d. traveler’s check.
4. The relationship between a bank and a depositor who opens a checking account at the bank is one of
a. bailor and bailee.
b. debtor and creditor.
c. bailor and independent contractor.
d. assignor and assignee.
5. If a drawer has a check certified, the drawer
a. remains primarily liable for payment.
b. is relieved of secondary liability.
c. is discharged.
d. remains secondarily liable for payment.
6. To hold a bank liable for a forged signature, how long after the canceled check has been returned does the drawer have to report the forgery?
a. ninety days,.
b. six months.
c. one year.
d. sixty days.
7. If a bank pays a check that has been materially altered, the bank
a. has no liability for the alteration.
b. is liable to the drawer for the amount of the alteration only if the drawer notifies the bank within one year after the altered check is returned to the depositor.
c. is liable only for the original amount of the check.
d. is liable only if notice of the alteration is received by the drawer within one year after the check is returned.
8. The electronic funds transfer system allows depositors to
a. make deposits and withdrawals using a computer terminal.
b. obtain traveler’s checks quickly.
c. postdate checks.
d. locate a missing endorsement on a check quickly.
9. A bad check is one written by a
a. maker who has insufficient funds in a savings account.
b. drawer who has insufficient funds in a checking account.
c. drawee who has insufficient funds in a checking account.
d. depositor who has insufficient funds in a savings account.
10. After a drawer’s death, a bank legally can pay or certify checks drawn before the drawer’s death for
a. ninety days.
b. sixty days.
c. five days.
d. ten days.
11. When a depositor tells the bank not to pay a particular check, the procedure is called
a. dishonoring the check.
b. forging the check.
c. negotiating the check.
d. stopping payment on the check.
12. A postdated check is
a. payable on demand.
b. invalid.
c. payable on its due date.
d. payable thirty days after its due date.
13. A popular type of cashier’s check issued by a bank or a private company such as American Express that transfers funds to a named payee and is considered a safe method of carrying funds is a:
a. money order.
b. certificate of deposit.
c. certified check.
d. traveler’s check.
14. When a check is certified, the certifying bank
a. dishonors the check.
b. draws on its own funds.
c. guarantees payment of the check.
d. draws on the funds in another bank.
15. If the name of a fictitious payee is put on a check and that name then is endorsed, the bank that pays the check
a. is liable for the full amount of the check.
b. is not liable to the drawer.
c. shares liability with the drawer.
d. shares liability with the payee.
16. An oral stop-payment order is binding on a bank for
a. thirty days.
b. fourteen days.
c. six months.
d. three months.
17. A stale check is one that is more than
a. six weeks old.
b. three months old.
c. one year old.
d. six months old.
18. If a bank dishonors a check for no good reason, the customer can collect from the bank
a. only the service fee charged by the bank.
b. all damages the customer suffers.
c. any damages that cause injury to the customer’s reputation resulting from a bad credit rating or from being arrested and prosecuted.
d. nothing.
19. An overdraft occurs when a
a. bank allows a customer to write checks for more than the amount of money on deposit.
b. customer writes a bad check.
c. bank cashes a check that is more than three months old.
d. bank cashes a check dated after its actual date of issue.
20. When a customer presents a merchant with a debit card to purchase goods, the transaction is called a(n)
a. EFT transfer.
b. ATM transaction.
c. POS transaction.
d. VISA transaction.