Commercial Paper Practice Exam 200 Questions with Detailed Answers and Rationales Latest Update 2026

Commercial Paper Practice Exam 200
Questions with Detailed Answers and
Rationales Latest Update 2026


Table of Contents

Part I: Types of Negotiable Instruments (Questions 1-20)

●​ Promissory Notes
●​ Drafts
●​ Checks
●​ Certificates of Deposit
●​ Trade Acceptances
●​ Distinguishing Features

Part II: Requirements of Negotiability (Questions 21-50)

●​ Writing and Signature
●​ Unconditional Promise or Order
●​ Fixed Amount of Money
●​ Payable on Demand or at a Definite Time
●​ Payable to Order or Bearer
●​ Words of Negotiability
●​ Omissions and Ambiguities

Part III: Negotiation and Indorsements (Questions 51-80)

●​ Bearer Paper and Order Paper
●​ Blank Indorsements
●​ Special Indorsements

, ●​ Restrictive Indorsements
●​ Qualified Indorsements
●​ Anomalous Indorsements
●​ Forged and Unauthorized Indorsements

Part IV: Holder in Due Course (Questions 81-110)

●​ Requirements for HDC Status
●​ Value
●​ Good Faith
●​ Without Notice
●​ Shelter Rule
●​ Rights of HDC
●​ Real Defenses vs. Personal Defenses

Part V: Liability of Parties (Questions 111-140)

●​ Primary Liability (Makers and Acceptors)
●​ Secondary Liability (Drawers and Indorsers)
●​ Contract Liability
●​ Warranty Liability
●​ Accommodation Parties
●​ Presentment and Notice of Dishonor

Part VI: Presentment, Dishonor, and Notice (Questions 141-160)

●​ Presentment Requirements
●​ Dishonor
●​ Notice of Dishonor
●​ Excuses for Presentment and Notice
●​ Time Limits

Part VII: Bank Deposits and Collections (Questions 161-180)

●​ Collecting Banks
●​ Payor Banks

, ●​ Midnight Deadline
●​ Final Payment
●​ Chargeback
●​ Customer Agreements

Part VIII: Discharge, Forgery, Alteration, and Miscellaneous (Questions
181-200)

●​ Discharge of Liability
●​ Forgery and Unauthorized Signatures
●​ Alteration
●​ Imposters and Fictitious Payees
●​ Employer Responsibility
●​ Statute of Limitations




Part I: Types of Negotiable Instruments

1. Question: A person writes a document promising to pay a specified sum
to another person. The document is signed by the maker and contains an
unconditional promise to pay. What type of instrument is this?​
A) Draft​
B) Check​
C) Promissory Note​
D) Certificate of Deposit

Answer: C) Promissory Note​
Rationale: A promissory note is a written promise by one party (the maker)
to pay a fixed sum of money to another party (the payee). It involves two
parties: the maker and the payee.

2. Question: A person writes an order directing a bank to pay a specified
sum to a third party. What type of instrument is this?​
A) Promissory Note​

, B) Draft​
C) Certificate of Deposit​
D) Trade Acceptance

Answer: B) Draft​
Rationale: A draft is a written order by one party (the drawer) directing
another party (the drawee) to pay a sum of money to a third party (the
payee). It involves three parties.

3. Question: A draft that is drawn on a bank and payable on demand is
called a:​
A) Check​
B) Certificate of Deposit​
C) Trade Acceptance​
D) Promissory Note

Answer: A) Check​
Rationale: A check is a draft drawn on a bank and payable on demand. The
drawer orders the bank to pay a specified sum to the payee.

4. Question: A bank issues a document acknowledging receipt of a deposit
and promising to repay it with interest. What type of instrument is this?​
A) Check​
B) Draft​
C) Certificate of Deposit​
D) Promissory Note

Answer: C) Certificate of Deposit​
Rationale: A certificate of deposit (CD) is a promissory note issued by a
bank. It acknowledges receipt of a deposit and promises to repay it with
interest at a specified time.

5. Question: A seller of goods draws a draft on the buyer for the purchase
price. The buyer accepts the draft. What type of instrument is this?​
A) Check​