CHAPTER 20—NATURE OF NEGOTIABLE INSTRUMENTS
Key
1. _____ are writings drawn in a special form that can be transferred from person to person as a substitute for
money or as an instrument of credit.
2. A commercial paper, which is made payable only to a named person, is called _____.
3. A written order by one person directing another to pay a sum of money to a third person is known as
a(n)_____.
4. The person who is ordered to pay a draft is called the _____.
5. The person who executes a promissory note is called the _____.
6. Which of the following is true of electronic fund transfers?
7. A system of shortening the trip a bill of exchange makes from the payee to the drawee bank and then to the
drawer is called _____.
8. Which of the following is true of automated teller machines?
9. Rules applied by courts set up by merchants in early England are known as the law merchant.
10. Transferring is the act of transferring ownership of a negotiable instrument to another party.
11. If commercial paper is made payable to whoever has possession of it, the bearer, it is called order paper.
12. A draft is also known as a promissory note.
13. The person to whom any negotiable instrument is made payable is called the drawer.
14. A holder who takes a negotiable instrument in good faith and for value is a holder in due course.
15. The maker makes an indorsement by signing on the back of the instrument.
16. Negotiable instruments are also known as instruments of collection.
17. Generally, a transfer initiated by a telephone call between a bank employee and a customer is an example of
an electronic fund transfer.
18. A preauthorized credit allows the amount of regular payments to be automatically deposited in the
payee’s account.
19. Electronic fund transfers that begin at retailers when consumers want to pay for goods or services with debit
cards are called point-of-sale systems.
20. Explain preauthorized debits and credits.