Patrick Bought a Widget from Ishani

question 3

Multiple Choice

Patrick bought a widget from Ishani.The purchase price was $25 000.He paid by giving her a cheque for that amount that was drawn on his account at the Bank of Fundy.The cheque was made payable to Ishani.By coincidence, Ishani owes $25 000 to XYZ Inc.Which of the following statements is TRUE?

• A)If Ishani negotiated the cheque to XYZ Inc, that company would be entitled to turn the cheque into a bearer instrument.
• B)If Ishani negotiated the cheque to XYZ Inc, that company could not ask the Bank of Fundy to certify the cheque.
• C)If Ishani wanted to negotiate the cheque to XYZ Inc, she would have to first have the cheque certified by the Bank of Fundy.
• D)If Ishani negotiated the cheque to XYZ Inc, that company could receive payment from the Bank of Fundy only if it first provided consideration to Patrick.
• E)Ishani can discharge her debt to XYZ Inc by simply delivering the cheque to the company.

---

Definitions:

CAPM

Capital Asset Pricing Model; a model that describes the relationship between risk and expected return and that is used in the pricing of risky securities.

Arbitrage Pricing Theory

A financial model that estimates the price of securities by considering the relationship between their expected returns and macroeconomic factors.

Single Market Index

An index that measures the performance of a specific market segment or region.

Nonsystematic Risk

This type of risk is unique to a specific company or industry and can be reduced through diversification.