MCQ Bank

Mr.Akram steals a bearer check and gives it to Mr. Kahlid against his debt payment. Mr.Khalid fails to receive the payment due to stop payment of that stolen cheque. Who is holder in due course in this case?

A) All of the given options
B) Bank
C) Mr.Khalid
D) Mr.Akram

AI Explanation

Mr. Khalid received the bearer check in good faith for a preexisting debt without knowledge of the theft, qualifying him as a holder in due course under negotiable instrument law.

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_______________________ is the maker of bill of exchange in a trade agreement.

A) Principal
B) Exporter
C) Importer
D) None of the available options

AI Explanation

In international trade transactions, the exporter typically draws the bill of exchange upon the importer, making the exporter the maker or drawer of the instrument.

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Full endorsement is also called ____________________________.

A) Special endorsement
B) Blank endorsement
C) Restrictive endorsement
D) Partial endorsement

AI Explanation

A full endorsement—where the endorser specifies the person to whom or to whose order the instrument is to be payable—is also known as a special endorsement.

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All of the following are examples of Quasi Negotiable Instruments, under the Negotiable Instrument Act, 1881, EXCEPT:

A) Dividend Warrants
B) Bearer Debentures
C) Dividend Warrants
D) Banker’s Cheque

AI Explanation

Dividend warrants (listed twice in the choices as options A and C) are widely recognized as quasi-negotiable instruments along with bearer debentures and banker's cheques, making them standard examples.

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Which one of the followings is not considered as signature by the maker of a promissory note?

A) Lithographed signature
B) Name written with pencil
C) None of the given options
D) Rubber stamp

AI Explanation

Signatures by a maker can legally take various forms including rubber stamps, pencil, or lithographed impressions as long as they are intended to authenticate the document.

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Which one of the following is not the party of a bill of exchange?

A) Drawee
B) Drawer
C) None of the given options
D) Payee

AI Explanation

The three primary parties to a bill of exchange are the drawer, drawee, and payee. Since all listed choices are valid parties, none of the given options correctly identifies a non-party.

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The potential risk of loss associated with the bank’s trading account portfolios is called _____________________.

A) None of the given options
B) Equity and security price risk
C) Foreign Exchange rate risk
D) Interest rate risk

AI Explanation

The risk associated with a bank's overall trading account portfolios—covering fluctuations in market prices across equities, commodities, interest rates, and foreign exchange—is formally known as market risk or price risk.

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Blank endorsement is also called _____________________.

A) Partial endorsement
B) General endorsement
C) Full endorsement
D) Restrictive endorsement

AI Explanation

A blank endorsement, where the endorser merely signs their name without specifying a payee, makes the instrument payable to bearer and is also referred to as a general endorsement.

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Bill of exchange is issued by __________________________

A) Agent
B) Creditor
C) Principal
D) Debtor

AI Explanation

A bill of exchange is drawn by the creditor (the drawer) upon the debtor, ordering them to pay a specific sum of money to a designated payee.

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An endorsement is said to be restrictive endorsement under which of the following condition?

A) If the endorser signs his name only
B) If the endorser adds a direction to pay the amount mentioned in the instrument to, or to the order of, a specified person
C) If the endorser purports to transfer to the endorsee only a part of the amount payable
D) If the endorser restricts or excludes the right to further negotiate the instrument

AI Explanation

A restrictive endorsement is one that explicitly restricts or completely excludes the right of the endorsee to further negotiate or transfer the instrument.

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Q10

In a bill of exchange the maker is the _______________________________.

A) Principal debtor
B) Creditor
C) All of the given options
D) Surety

AI Explanation

In a bill of exchange, the maker is the drawer, who is typically the creditor owed money by the drawee.

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Q11

Mr.Ahmad directs Mr.Ali to pay Rs: 100,000 to Mr.Tahir on 1st of July 2021. Who can be the endorser in this case?

A) Mr.Ali
B) Mr.Ahmad
C) Mr.Tahir
D) None of the given options

AI Explanation

Mr. Tahir is the payee of the instrument and becomes the holder, meaning he has the right to endorse the instrument to a third party.

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Q12

A person who signs a negotiable instrument as a maker, drawer, acceptor or endorser without receiving its value is called ______________________________.

A) A bearer
B) Notary public
C) A banker
D) Accommodation party

AI Explanation

An accommodation party is someone who signs a negotiable instrument for the purpose of lending their credit to another party without receiving value or consideration.

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Q13

Mr.Aslam presents cheque for payment on a cash counter with his name specified in in the payee part of the cheque is holding a ________________________ .

A) Blank cheque
B) Bearer cheque
C) Crossed cheque
D) Order cheque

AI Explanation

A cheque that specifies a particular payee's name without containing words prohibiting transfer (like 'only') is classified as an order cheque.

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Q14

I promise to pay Mr.Ahmad Rs: 100, 000, thirty days after getting admission in University does not qualify for a promissory note because _______________________________.

A) None of the given options
B) It is conditional
C) It is undertaking
D) Time of payment is not certain

AI Explanation

A promissory note must contain an unconditional promise to pay; tying payment to an uncertain future event like getting admission makes it conditional and invalid as a negotiable instrument.

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Q15

Which of the following is NOT defined by the Negotiable Instrument Act, 1881?

A) Customer
B) Notary public
C) Material alteration
D) Delivery

AI Explanation

The term 'customer' is not formally defined under the Negotiable Instruments Act, 1881, whereas terms like material alteration, delivery, and notary public are addressed.

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Q16

The relationship between holder of a demand draft and the bank issuing it is that of _________________.

A) Drawer and payee
B) Principal and Agent
C) All of the given options
D) Debtor and creditor

AI Explanation

The legal relationship between the purchaser or holder of a demand draft and the issuing bank is that of a debtor and creditor.

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Q17

A bill of exchange is an order to pay ___________________ only.

A) Shares
B) All of the given options
C) Bonds
D) Money

AI Explanation

By definition, a bill of exchange must contain an unconditional order to pay a certain sum of money only, rather than property, shares, or bonds.

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Q18

The primary document that establishes the relationship of debtor and creditor between customer and bank in a loan agreement is______________________________

A) Demand draft
B) Bill of exchange
C) Cheque
D) Promissory note

AI Explanation

A promissory note serves as the primary formal legal document evidencing a debt and establishing a debtor-creditor relationship in a standard loan agreement.

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Q19

Loan compositions of banks vary due to following factors Except:

A) Size
B) Lending rate
C) Location
D) Trade area

AI Explanation

While size, location, and trade area heavily influence bank loan compositions, the overall lending rate itself is typically a market-driven or policy variable rather than a structural compositional factor.