MCQ Bank

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.

BNK601 Final Term AI Solved

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.

BNK601 Final Term AI Solved

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.

BNK601 Final Term AI Solved

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.

BNK601 Final Term AI Solved

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.

BNK601 Final Term AI Solved

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.

BNK601 Final Term AI Solved

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.

BNK601 Final Term AI Solved

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.

BNK601 Final Term AI Solved

Q20

Promissory note is issued by _____________________________

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

AI Explanation

A promissory note is an unconditional promise in writing made by a debtor to a creditor, making the debtor the issuer or maker of the instrument.

BNK601 Final Term AI Solved

Q21

A negotiable instrument that can be made payable to the maker himself is called____________________.

A) Promissory note
B) Promissory note
C) None of the given options
D) Bill of exchange

AI Explanation

Unlike a bill of exchange or cheque which cannot be drawn payable to the maker alone, a promissory note can legally be made payable to the maker themselves.

BNK601 Final Term AI Solved

Q22

Which one of the following is a continuous and integral part of the credit life cycle?

A) Follow up and monitoring of the loan
B) To analyze the paying capacity of the borrower
C) Technical and economical appraisal
D) To conduct the financial analysis of the borrowers financial statements

AI Explanation

Follow up and continuous monitoring of the loan is an ongoing, integral phase of the credit life cycle that runs throughout the duration of the credit facility.

BNK601 Final Term AI Solved

Q23

Banks can _____________________ to avoid liquidity risk.

A) Increase lending
B) Sell liquid assets
C) None of the given options
D) Decrease borrowing

AI Explanation

To manage liquidity risk effectively, banks typically increase liquid assets or borrow funds rather than selling liquid assets or decreasing borrowing indiscriminately.

BNK601 Final Term AI Solved

Q24

Which of the following is not a negotiable instrument?

A) Currency note
B) Bill of exchange
C) Banker’s cheque
D) A cheque

AI Explanation

A currency note is legal tender issued by the central bank and is governed by currency laws rather than the Negotiable Instruments Act, meaning it is not classified as a negotiable instrument.

BNK601 Final Term AI Solved

Q25

An ATM machine outside a bank’s branch is not dispensing cash, which type of risk the bank is facing?

A) Credit risk
B) Liquidity Risk
C) Market risk
D) Operational risk

AI Explanation

An ATM malfunctioning and failing to dispense cash represents a failure of internal systems, processes, or technology, which falls directly under operational risk.

BNK601 Final Term AI Solved

Q26

If the endorser restricts or excludes the right to further negotiate the instrument then it is called ________________.

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

AI Explanation

An endorsement that explicitly restricts or excludes the right of the endorsee to further negotiate the instrument is defined as a restrictive endorsement.

BNK601 Final Term AI Solved

Q27

Which one of the following does not qualify as promissory note?

A) Thirty days after date, I owe to pay Mr.Ahamd or order the sum of rupees one hundred thousand only and the amounts which may be due to Ahmad by date.
B) I owe Rs 10,000 to Mr. Ahmad
C) All of the given options
D) I promise to may Mr.Ahmad Rs: 100,000 thirty days after getting admission in University.

AI Explanation

None of the provided statements qualify as a valid promissory note because they either lack an unconditional promise to pay, depend on an uncertain event, or have an uncertain amount.

BNK601 Final Term AI Solved

Q28

Banks involve in off-balance sheet activities to earn profit. Which one of the following is not an off-balance sheet item?

A) Derivative contracts
B) Advances
C) Guaranty offers
D) Loan commitments

AI Explanation

Advances represent direct loans extended by a bank and are recorded directly on the asset side of the balance sheet, unlike off-balance sheet items such as guarantees, commitments, and derivatives.

BNK601 Final Term AI Solved

Q29

If the endorser adds a direction to pay the amount mentioned in the instrument to, or to the order of, a specified person it is called ____________________________.

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

AI Explanation

A full endorsement specifies a particular person to whom or to whose order the amount of the instrument is to be paid.

BNK601 Final Term AI Solved

Q30

In a promissory note the maker is the ____________________.

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

AI Explanation

In a promissory note, the maker is the person who promises to pay, making them the principal debtor obligated to fulfill the payment.

BNK601 Final Term AI Solved

Q31

Following are the conditions of a person to be called as “Holder in due course” Except:

A) He must have obtained the instrument in good faith
B) He obtains the instrument for valuable consideration
C) He becomes the holder of the instrument after maturity
D) He must take the instrument complete on the face of it

AI Explanation

A holder in due course must acquire the instrument before its maturity; acquiring it after maturity disqualifies them from this status.