Sarah Has a Checking Account at First Bank

question 64

Multiple Choice

Sarah has a checking account at First Bank.Orrin steals one of her blank checks,writes a check for $250,and then forges Sarah's signature.He then presents the check to First Bank for payment.First Bank pays the forged instrument.Which of the following statements is correct?

• A)First Bank will have to recredit the $250 to Sarah's account if she so requests.
• B)Orrin is responsible to First Bank for the $250.
• C)Sarah is primarily liable on the check even if she did not sign it and was not negligent in allowing Orrin to take the blank check.
• D)Two of the above, (a) and (b), are correct.

---

Definitions:

Subordinated Bond

A type of bond that has a lower priority than other bonds of the issuer in case of liquidation during bankruptcy.

Debenture

A type of debt instrument that is not secured by physical assets or collateral but based on the creditworthiness and reputation of the issuer.

Unsecured Debt

A type of debt or general obligation that is not protected by a guarantor, or collateralized by a lien on specific assets of the borrower.

Maturity

The time at which payment to a bondholder is due from the issuer, according to the bond's terms.