[Run Around] Hema Issues a Promissory Note to Rahul

question 10

Multiple Choice

[Run Around] Hema issues a promissory note to Rahul.Rahul endorses the note and transfers it to Anne.Anne endorses the note and transfers it to Floyd.Floyd presents the note to Hema for payment.When Floyd presents the note to Hema,she asks him for reasonable identification.He did not have any identification with him and told her that she had no right to dishonor the instrument.Hema continued to insist,so finally,on the same day,Rahul obtained clear identification and presented it to her.Nevertheless,even with proper identification,Hema refused to pay the note,claiming that she lacked the funds with which to do so.After properly providing notification of dishonor to both Anne and Rahul,Floyd requested that Anne pay the note,but she told him that he would have to get his money from Rahul.Floyd has been trying to call Rahul for 35 days,but Rahul did not return his telephone calls.Floyd is exasperated;and within 40 days of when Hema refuses payment,he notifies Hema,Rahul,and Anne that the promissory note has been dishonored by Hema and that he is asserting liability on the note against all of them.Hema calls him up and says that she never dishonored the note,she simply lacks the funds with which to immediately pay and thinks that he should seek recovery elsewhere.
-Which of the following is true regarding when,and if,the note was initially dishonored?

• A)Hema initially dishonored the instrument when she asked for proper identification.
• B)The note was not dishonored until Anne told Floyd that he would have to seek recovery from Rahul.
• C)Hema initially dishonored the instrument when she refused to pay it on the basis that she lacked funds with which to do so.
• D)The note was considered initially dishonored 30 days after Floyd started seeking Rahul,but was unable to find him.
• E)The note has never been dishonored because Floyd's right to receive payment on the note from someone is acknowledged.

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Definitions:

Equity-Financed

Pertains to the method of funding a business through selling shares to investors, thereby increasing ownership equity.

Incremental Value

The additional value created by undertaking a specific project or action, measured by the difference in a firm's value with and without the undertaking.

Outstanding Stock

The total shares of a corporation that are currently owned by all its shareholders, including shares held by institutional investors and restricted blocks held by insiders and company officers.