Reference - Run Around

question 3

Multiple Choice

Reference - Run Around. Millie issues a note to Bob. Bob endorses the note and transfers it to Anne. Anne endorses the note and transfers it to Henry. In a timely fashion, Henry endorses the note and presents it to Millie for payment. When Henry presents the note to Millie, 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. Millie, however, refused to provide him the funds until he returned with proper identification. Nevertheless, when he returned with proper identification, Millie refused to pay the note, claiming that she lacked the funds with which to do so. Henry proceeded immediately to request that Anne pay the note, but she told him that he would have to get his money from Bob, who cannot be found. Which of the following is true regarding Anne's statement to Henry that he must seek recovery from Bob?

• A) Anne is correct.
• B) Anne is correct only if Bob is able to pay and has not filed bankruptcy.
• C) Anne is correct in that Henry should seek recovery from Bob only if Millie has filed bankruptcy because, otherwise, Henry should be seeking primary payment from Millie.
• D) Anne is correct unless the notice is for over $10,000, in which case Henry can seek recovery from her without resorting to recovery from Bob or Millie.
• E) Anne is incorrect. Henry may seek recovery from her without first seeking recovery from Bob or Millie.

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Definitions:

Discount Rates

The rate of interest employed to discount future cash flows to their present value in discounted cash flow analysis.

Weighted Average

A mathematical calculation that takes into account the varying degrees of importance of the numbers it is applied to, often used in financial analysis and accounting.

Project Risk

The potential for losses or less than expected returns from a particular project due to factors such as cost overruns, delays, or changing conditions.

Pure Play Approach

A business strategy focusing solely on a single product or service to gain competitive advantage.