40. ABC Bank sent Joanne, a depositor, her January statement on January 31. Within what length of time after this date
will Joanne have to examine the statement and enclosed items and notify ABC bank of any errors?
a. 10 days
b. 30 days
c. 60 days
d. 1 year
41. Doug takes a $500 check drawn by Gail to Gail’s drawee bank to cash it. Gail has over $10,000 on deposit in her
account. If her bank refuses to pay Doug:
a. Doug can sue the bank and demand payment if the check is not “stale.”
b. and the check is over 30 days old, the bank has a right to refuse payment.
c. the bank has incurred a liability to Gail for its improper refusal to pay the check if it is not “stale.”
d. All of these.
42. Sylvia draws a check on ABC Bank payable “to the order of Ann Smith.” Ann indorses it and deposits it in First
Bank. First Bank is a:
a. drawee bank.
b. collecting bank.
c. payor bank.
d. None of these.
43. Lois takes her paycheck to Third National Bank for deposit at 6 p.m. on Wednesday. Third National Bank has until
when to forward the check?
a. Midnight Thursday
b. Midnight Friday
c. Close of business Friday
d. Close of business Thursday
44. A substitute check:
a. is basically a copy of the original check that shows both the front and back of the original check.
b. is not suitable for automated processing in the same manner as the original but is used by the banks for
storage of the information on an original check after processing.
c. bears a legend stating that it is only a copy of a check and that it is not to be used in the same way as the
original.
d. All of these.
45. If Ben Stewart has a checking account at First Bank:
a. the relationship between Ben and his bank is based primarily on their contractual agreement.
b. First Bank is a creditor and Ben is a debtor.
c. Ben is an agent of First Bank.
d. All of these.
46. If Margie makes out a check for $27.50 when she has only $10 in her account, her bank may:
a. refuse to pay the check.
b. pay the check.
c. bill Margie for $17.50 and a service charge.
d. Any of these.
47. On April 6, Ellen sends a check for a magazine subscription and then discovers she has already paid for it. She calls
her bank and orders that the bank not make payment. That order will be good until:
a. April 13.
b. October 6.
c. April 13 if confirmed in writing.
d. October 6 if confirmed in writing.
48. The first bank to receive a check for collection is the:
a. depositary bank.
b. drawee bank.
c. payor bank.
d. intermediary bank.
49. A system for electronic funds transfers (EFT) in which machines are located in a merchant’s store and are activated
by the consumer’s identification card and code is known as:
a. POS.
b. RAM.
c. EFTA.
d. CHIPS.
50. Which of the following is true with regard to the federal Electronic Fund Transfer Act?
a. It is primarily a disclosure statute.
b. It gives the same protections to customers that are found in Article 4.
c. It limits a customer’s liability for unauthorized transfers to $500 if notification requirements are met.
d. All of these.
51. Which of the following is NOT a duty that a collecting bank has in the collection process?
a. Duty of care
b. Duty to act timely
c. Duty to honor a valid stop payment order
d. Duty to honor a restrictive indorsement
52. Sylvia deposits a $50 check drawn on Valley Bank into her account at First Bank. First Bank transfers the check to
Second Bank, which in turn forwards it to Valley Bank, which pays the item. Which of the following is correct?
a. Valley Bank is the payor bank and the drawee bank.
b. Valley Bank is the drawee bank and the collecting bank.
c. Valley Bank is the payor bank and the collecting bank.
d. Valley Bank is the payor bank, the drawee bank and the collecting bank.
53. Helen deposits a $50 check in her account at First Bank at 4:00 on Friday. The bank is closed on Saturday and
Sunday, but opens again on Monday. The midnight deadline for First Bank would be:
a. Midnight Saturday
b. Midnight Sunday
c. Midnight Monday
d. Midnight Tuesday
54. What Article of the UCC governs electronic funds transfers?
a. Article 3
b. Article 4
c. Article 4A
d. Article 5
55. A payment order:
a. is a sender’s instruction to a receiving bank to pay, or to cause another bank to pay, a fixed or determinable
amount of money to a beneficiary.
b. is issued when sent and, if more than one payment is to be made, the payments are condensed into one
payment order.
c. must be communicated in writing or electronically.
d. All of these.
56. Which of the following is/are excluded from UCC Article 4A coverage?
a. Credit transactions
b. A transfer of credit that moves from an originator to a beneficiary through the banking system
c. A funds transfer that is, even partially, governed by the EFTA
d. All of these.
57. If Valley Bank pays a check over a stop payment order of one of its customers, Valley Bank is subrogated to the
rights of:
a. the drawer against the payee or any other holder.
b. any holder in due course on the item against the drawer.
c. the payee or any other holder against the drawer.
d. All of these are correct.
58. The desired effect of EFTS is to:
a. avoid the delay between issuance of a check and receiving the canceled check.
b. eliminate errors.
c. ease the mobility of society.
d. both avoid the delay between issuance of a check and final payment, and also to eliminate paperwork.
59. If you lose your wallet along with your bank ATM card, your liability is
a. unlimited unless you notify the bank within 30 days.
b. limited to $200 if you notify the bank within 2 days.
c. limited to $500 if you notify the bank within 2 days.
d. limited to $50 if you notify the bank within 2 days.
60. Wholesale electronic funds transfers:
a. are also called wholesale wire transfers.
b. involve the transfer of more than one trillion dollars each business day.
c. use Fedwire, CHIPS, and numerous private wire systems.
d. All of these.
61. A check drawn on a bank is an order to pay a sum of money and an authorization to charge the amount to the
drawer‘s account. The drawer may countermand this order by which of the following?
a. A canceled check
b. A stop payment order
c. A banker’s acceptance
d. A time draft
62. Which of the following is correct with respect to a bank customer’s duty to discover and report unauthorized
signatures?
a. The customer is required to exercise reasonable promptness in examining the bank statement.
b. This duty of examination includes the signatures of payees or indorsers.
c. The bank is liable on all items with unauthorized signatures even if these canceled checks were returned to
the customer four years prior to the discovery of the alterations.
d. The bank customer must report an unauthorized indorsement within one year of its occurrence.
63. Cheryl writes checks totaling $200, but she has only $100 in her account. Check #101 is for $50; #102 is for $75;
#103 is for $25; and #104 is for $50. All of the checks reach the bank on the same day. In what order should the
bank charge them?
a. Under Article 4, it must charge them in the order in which they were drawn.
b. It must call the customer to ask which items should be paid.
c. The bank may pay them in any order it deems convenient.
d. The bank must dishonor all of the checks.
64. Which warranties does a collecting bank give?
a. Warranty of no alteration only
b. Good title, authentic signatures, no alteration, no defense good against it, and no knowledge of insolvency
c. Good title and genuine signatures only
d. A collecting bank does not give any warranties
65. What is the effect of a payor bank’s dishonor of a check?
a. It returns the check to each intermediary or collecting bank.
b. The provisional credits must be reversed.
c. The customer who deposited the item for collection must cover the item and seek recovery from the drawer
or indorsers.
d. All of these will occur.
66. Describe and summarize what happens during the collection process once a check is deposited in a customer’s
account. How does it get back to the drawee?
67. What is electronic funds transfer? Why do banks like it? What provisions are in the law to protect the customer who
uses electronic funds transfer?
68. Tania calls her bank to issue an oral stop payment order on a check on March 1. She then leaves town for two weeks
to visit her mother. When she returns, she goes to the bank to sign a written stop payment order, but finds the bank
has already paid the check. What recourse does she have? Explain, citing provisions in Article 4.
69. Theresa has just started working as a teller for First Bank. A man comes into the bank with a $100 check that is
eight months old. She goes to the manager to ask whether she should pay it. If you were the manager, what would
you advise her? Explain.
70. Montey receives his monthly bank statement on December 30th. He looks at it quickly, then sets it aside. Three days
later, he examines it again and discovers a forged check. What must he do to avoid responsibility for the check? Cite
Code provisions.
71. What are wholesale funds transfers? What governs these transfers?