Anupama Drew a Check on Her Account at Mortimer Bank

question 1

Multiple Choice

Anupama drew a check on her account at Mortimer Bank payable to the order of Prahlad. When Prahlad presented the check for payment, Mortimer Bank refused to honor the check. Under these circumstances, the bank _____.

• A) may be liable to Anupama for wrongfully refusing payment if Anupama has sufficient funds in her checking account to cover it
• B) may be liable to Prahlad for wrongfully refusing payment if Anupama has sufficient funds in her checking account to cover it
• C) has breached its transferor's warranties
• D) will be liable to both Prahlad and Anupama

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Definitions:

Call Option

A financial arrangement granting the buyer the freedom, but not the duty, to acquire an asset such as a stock, bond, commodity, at a set price within an established timeframe.

Credit Default Swap

A financial derivative that allows an investor to swap or offset credit risk with another party.

Cross Hedging

A risk management strategy that involves hedging a position in one asset by taking a position in another asset with correlated price movements.

Risk Management

The process of identifying, analyzing, and taking steps to reduce or manage uncertainties and risks to an organization's capital and earnings.