Wallace Bought a Widget from Sabrina

question 68

Multiple Choice

Wallace bought a widget from Sabrina.The price was $7500.When he collected the widget from her warehouse,he gave her a cheque that was drawn on his account at the Bank of Windsor.When he got the widget home,however,he discovered that it was defective.He therefore went to his bank and placed a stop payment order on the cheque.Which of the following statements is TRUE?

• A)Wallace's cheque is overdrawn.
• B)When Sabrina presents the cheque for payment,the Bank of Windsor has a complete discretion to choose between honouring it and dishonouring it.
• C)Although he authorized the Bank of Windsor to debit his account when he wrote the cheque,Wallace's stop payment order revoked that authority.
• D)Sabrina can sue both Wallace and the Bank of Windsor if the bank refuses to honour the cheque.
• E)Sabrina is entitled to receive payment on the cheque if a court decides that Wallace was not entitled to discharge the sales contract on the basis that the goods were defective.

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Definitions:

American Put Option

A type of options contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price before or at a specified expiration date.

Market Interest Rates

The prevailing rate of interest available in the marketplace on investments and borrowing.

Exercise Price

The price at which the holder of an option can buy (for a call option) or sell (for a put option) the underlying asset.