Theory question 101
BankingCommerce 2 (essay, answer five questions only)
(a) What is a Capital Market?
(b) State eight reasons why a bank may dishonour a cheque
Show the model answer
Model answer
(a) The capital market is the market for long-term funds, where shares, stocks, bonds and long-term loans are raised and traded; members include the stock exchange, issuing houses, development and mortgage banks, insurance companies.
(b) Any eight: insufficient funds; payment stopped by drawer; post-dated cheque presented early; stale cheque; signature differs from specimen; words and figures differ; alterations not signed; death, insanity or bankruptcy of drawer; account closed or frozen by court order; irregular endorsement; mutilated cheque.
Explanation
Eight distinct reasons are needed in (b).