A note has an interest rate that varies based on the stated rate of 2% above the prime rate as determined by XYZ Bank in New York City. Under the Revised Article 3 of the Uniform Commercial Code, which of the following is true?
a. This interest rate provision destroys negotiability since it does not constitute a sum certain.
b. This note is not negotiable because the holder has to look outside the instrument to determine what the prime rate is.
c. The interest rate provision destroys negotiability because the prime rate can vary before the time the note comes due.
d. The interest rate provision is allowed in negotiable notes and does not destroy negotiability.
Answer: D
CPA Exam
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