Q1
A negotiable instrument is best defined as:
a) A document guaranteeing payment of money b) A document related to goods c) A promissory note without value
A document guaranteeing payment of money
Negotiable instruments are transferable: a) Any once b) Any number of times c) Only twice
Any number of times
A bill of exchange is accepted by the drawee. What does acceptance signify?
a) Drawee rejects payment b) Drawee promises to pay on due date c) Drawee cancels the bill
Drawer promises to pay on due date
A post-dated cheque is presented before the date written on it. What will the bank do?
a) Pay immediately b) Reject and return it c) Charge penalty
Reject and Return it
When a bill is discounted, the amount deducted by the bank is called:
a) Commission
b) Discount
c) Interest
b) Discount
“Free transferability” is a feature of a negotiable instrument because it can be transferred by:
a) Delivery only b) Endorsement only c) Endorsement and delivery
c) Endorsement and delivery
The term “negotiability” refers to : a) Transferability of instruments b) Exchange of goods c) Issuing currency
Transferability of instruments
Anita deposits a cheque with no crossing. The teller asks if she wants it crossed. Why?
a) To charge extra fees b) To ensure safer payment through bank account c) To increase validity period
To ensure safer payment through bank account
Neha receives a cheque marked “Not Negotiable.” What does this mean for her?
a) She cannot transfer it at all b) She can transfer it but the transferee won’t get better title
She can transfer it but the transferee won’t get better title
A foreign bill is one that is:
a) Drawn and payable in the same country
b) Drawn in one country and payable in another
c) Always payable at sight
b) Drawn in one country and payable in another
The person who holds a negotiable instrument in good faith and for value is known as: a) Drawer b) Holder c) Holder in due course.
C) Holder in due course
When a cheque is payable to any person who presents it, it is called: a) Bearer cheque b) order cheque c) post dated cheque
Bearer cheque
A supplier discounts a bill of exchange with his bank before maturity. Why is he doing this?
a) To get immediate cash b) To avoid payment c) To reject the bill
To get immediate cash
Priya writes a cheque but forgets to sign it. What will happen when the cheque is presented?
a) The bank will process it b) The cheque will bounce due to signature error c) The bank will ask the payee to sign
The cheque will bounce due to signature error
Which of the following is an inland bill?
a) Drawn in India, payable in USA
b) Drawn in India, payable in Delhi
c) Drawn in UK, payable in India
b) Drawn in India, payable in Delhi
Which of the following cheques can be encashed at the counter? A) Crossed cheques B) Order cheques C) Open cheques
Open cheques
A cheque that is dated earlier than the date of presentation is called:
A) Antedated cheque B) Post dated cheque C) Stale cheque
Antedated cheque
Atul endorses a cheque to his landlord for paying rent. What is he doing?
a) Cancelling the cheque b) Transferring ownership of the cheque c) Depositing it into his account
Transferring ownership of the cheque
Rohan receives a cheque with two parallel lines and the words “A/C Payee Only.” What does this indicate?
a) He can withdraw cash immediately b) The cheque must be deposited into his bank account only c) Anyone can deposit it
The cheque must be deposited into his bank account only
Which of the following is not related to time bills?
a) Three days of grace
b) Payable at sight
c) Maturity date
b) Payable at sight
A negotiable instrument ensures:
a) Conditional payment b) Unconditional payment c) No payment guarantee
b) Unconditional payment
Aman receives a stale cheque (older than 3 months). What should he do?
a) Deposit it anyway b) Return it and ask for a new cheque c) Cash it at any branch
Return it and ask for new cheque
A trader draws a bill of exchange on his customer for goods sold on credit. What is the purpose?
a) To secure legal evidence of debt b) To increase expenses c) To avoid tax
To secure legal evidence of debt
Discounting of a bill means:
a) Refusing the bill
b) Selling the bill before its maturity to a bank for cash
c) Cancelling the bill
b) Selling the bill before its maturity to a bank for cash
Discounting of bills is done by:
a) Drawer only
b) Drawee only
c) Bank
c) Bank