Question 1

To perfect a security interest in a negotiable instrument,Second State Savings and Loan should:

Accepted Answer

A)  file a financing statement. 
B)  take possession of the instrument. 
C)  do nothing.Perfection is automatic. 
D)  secure a court order. 
A)  file a financing statement. 
B)  take possession of the instrument. 
C)  do nothing.Perfection is automatic. 
D)  secure a court order. B

Question 2

Fowler Bros.has applied to Gibralter Bank for a $50,000 loan for its business expansion.If Fowler Bros.plans to use its account at Gibralter Bank as collateral,discuss what the bank needs to do for a security interest to attach.

Accepted Answer

Attachment is a vital step in a secured transaction.For an enforceable security interest to be created,or to attach,three steps must occur: the parties must make a security agreement and either the debtor has to authenticate a security agreement describing the collateral or the secured party has to obtain possession or control of the collateral,the secured party must give value to obtain the security agreement,and the debtor must have rights in the collateral.Ordinarily the agreement is in writing and signed by the debtor or electronically recorded and authenticated by the debtor.In this case,however,it will be sufficient if the parties have an oral agreement since the bank,the secured party,has control of the deposit account being used for collateral.The second element,value,is the money the bank loans.The third element is that the debtor has rights in the collateral.Fowler Bros.has a legal right to its deposit account in Gibralter Bank.

Question 3

Which of the following is true about a PMSI?

Accepted Answer

A)  It perfects automatically. 
B)  It must involve consumer goods. 
C)  It must be taken by someone selling or financing the goods. 
D)  all of these answers are true. 
A)  It perfects automatically. 
B)  It must involve consumer goods. 
C)  It must be taken by someone selling or financing the goods. 
D)  all of these answers are true. D

Question 4

Spicy & Hot,Inc.is interested in expanding its Mexican food restaurant into a Mexican food catering business.Spicy & Hot,Inc.buys a new delivery van from Van World.Spicy & Hot,Inc.is a buyer in the ordinary course of business when purchasing the van.

Accepted Answer

A) True 
 B)False

Question 5

What is the definition of default?

Accepted Answer

A)  According to the UCC a debtor must be late on 3 consecutive payments and not remedy within 90 days. 
B)  The parties define default in the security agreement. 
C)  The debtor failing to maintain insurance/ 
D)  None of the above. 
A)  According to the UCC a debtor must be late on 3 consecutive payments and not remedy within 90 days. 
B)  The parties define default in the security agreement. 
C)  The debtor failing to maintain insurance/ 
D)  None of the above.

Question 6

Explain the difference between attachment and perfection.

Accepted Answer

A security interest has to attach to the

Question 7

Wedney,Inc.sold a meat processing machine to Yoro Chickens,taking a security interest in the machine.Yoro Chickens defaulted on the loan.Wedney repossessed the machine.Wedney would like to retain the machine to use as a model.Which of the following statements is correct?

Accepted Answer

A)  Wedney must notify the debtor that it intends to retain the machine. 
B)  By taking possession,Wedney automatically foreclosed on the collateral.Wedney has valid title and need do nothing else. 
C)  Since the machine is equipment,Wedney cannot retain the machine.Wedney must dispose of the collateral in a commercially reasonable manner. 
D)  Wedney can retain the machine but must pay Yoro the surplus,the difference between the fair market value of the machine and the amount of the debt. 
A)  Wedney must notify the debtor that it intends to retain the machine. 
B)  By taking possession,Wedney automatically foreclosed on the collateral.Wedney has valid title and need do nothing else. 
C)  Since the machine is equipment,Wedney cannot retain the machine.Wedney must dispose of the collateral in a commercially reasonable manner. 
D)  Wedney can retain the machine but must pay Yoro the surplus,the difference between the fair market value of the machine and the amount of the debt.

Question 8

What must be done when a debtor pays off the debt secured by a security interest in goods?

Accepted Answer

A)  nothing must be done. 
B)  the collateral must be sold 
C)  a termination statement must be filed by the creditor. 
D)  the original note must be returned to the debtor. 
A)  nothing must be done. 
B)  the collateral must be sold 
C)  a termination statement must be filed by the creditor. 
D)  the original note must be returned to the debtor.

Question 9

Donna defaulted on her loan owed to Second State Savings and Loan.The loan was secured with Donna's car.Donna used the car for personal and family reasons.Which statement is correct?

Accepted Answer

A)  Second State may take Donna's car without a court order if this can be done without a breach of the peace. 
B)  Second State may take Donna's car without a court order even if it means a breach of the peace. 
C)  Second State may not take Donna's car because it is a consumer good. 
D)  Second State may not take Donna's car because perfection was automatic. 
A)  Second State may take Donna's car without a court order if this can be done without a breach of the peace. 
B)  Second State may take Donna's car without a court order even if it means a breach of the peace. 
C)  Second State may not take Donna's car because it is a consumer good. 
D)  Second State may not take Donna's car because perfection was automatic.

Question 10

The initial term for which a financing statement will be effective is:

Accepted Answer

A)  one year. 
B)  five years. 
C)  ten years. 
D)  two years. 
A)  one year. 
B)  five years. 
C)  ten years. 
D)  two years.

Question 11

For a security interest to attach,there must be an agreement.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following may not be used as collateral within the scope of UCC Article 9?

Accepted Answer

A)  Certificates of deposit. 
B)  Accounts receivable. 
C)  Goodwill. 
D)  A 250-acre farm. 
A)  Certificates of deposit. 
B)  Accounts receivable. 
C)  Goodwill. 
D)  A 250-acre farm.

Question 13

First Federal had a perfected security interest in Vicor's printing press.Second Credit had a security interest in the same press,but its interest was not perfected.First Federal takes priority over Second Credit.

Accepted Answer

A) True 
 B)False

Question 14

What are the duties of the secured party when it is disposing of collateral upon a default.

Accepted Answer

A)  sell the collateral in a public sale only. 
B)  dispose of the collateral in any reasonably manner 
C)  no duty of further notice to the defaulting debtor. 
D)  all of the above 
A)  sell the collateral in a public sale only. 
B)  dispose of the collateral in any reasonably manner 
C)  no duty of further notice to the defaulting debtor. 
D)  all of the above

Question 15

One of the more secure methods of perfection is taking possession of the collateral.

Accepted Answer

A) True 
 B)False

Question 16

In 2012 The National Conference of Commissioners on Uniform Satte Laws created a set of amendments to Article 9 of the UCC. What is true about these amendments.

Accepted Answer

A)  The amendments are binding on all 50 states. 
B)  require that a party's name be that contained on his or her birth certificate. 
C) .six states have voted to adopt the amendments to Article 9 of the UCC. 
D)  none of the above 
A)  The amendments are binding on all 50 states. 
B)  require that a party's name be that contained on his or her birth certificate. 
C) .six states have voted to adopt the amendments to Article 9 of the UCC. 
D)  none of the above

Question 17

A security interest in money may be perfected by:

Accepted Answer

A)  filing a financing statement. 
B)  creating a PMSI. 
C)  possession only. 
D)  redemption. 
A)  filing a financing statement. 
B)  creating a PMSI. 
C)  possession only. 
D)  redemption.

Question 18

Which of the following parties can defeat a perfected security interest?

Accepted Answer

A)  A "buyer in ordinary course of business." 
B)  A buyer of consumer goods if the buyer is not aware of the security interest,gives value for the goods,will continue to use the goods as consumer goods,and the secured party has not filed a financing statement. 
C)  A buyer who purchases chattel paper or an instrument in the ordinary course of business,and then takes possession. 
D)  All of the above are correct. 
A)  A "buyer in ordinary course of business." 
B)  A buyer of consumer goods if the buyer is not aware of the security interest,gives value for the goods,will continue to use the goods as consumer goods,and the secured party has not filed a financing statement. 
C)  A buyer who purchases chattel paper or an instrument in the ordinary course of business,and then takes possession. 
D)  All of the above are correct.

Question 19

Aubry purchased a washing machine,a freezer,and a refrigerator from Gateway Appliances on credit,giving Gateway a security interest in the appliances.The appliances were for Aubry's household use.Gateway did not file a financing statement.Six months later,Aubry had a garage sale and sold the appliances to Tam.Tam bought the appliances for her student rental property.Aubry left town owing money on the appliances.If Gateway can trace the appliances to Tam,can Gateway repossess the appliances? Explain in detail.

Accepted Answer

Yes.Generally with consumer goods,a buye

Question 20

On April 10,Amy agreed to buy a riding lawn mower from Mowers Plus,signing a promissory note and security agreement giving Mowers Plus a security interest in the mower.On April 15,Amy took delivery of the mower.On May 1,Mowers Plus filed a financing statement.Which of the following is correct?

Accepted Answer

A)  Despite the agreement,Mowers Plus could not create a security interest in the mower since it is a consumer good. 
B)  Mowers Plus has attachment of a security interest in Amy's mower. 
C)  Mowers Plus completed the attachment of a security interest in the mower when it filed the financing statement on May 1. 
D)  The security interest has not attached,but attachment is unimportant to enforceability of a security interest. 
A)  Despite the agreement,Mowers Plus could not create a security interest in the mower since it is a consumer good. 
B)  Mowers Plus has attachment of a security interest in Amy's mower. 
C)  Mowers Plus completed the attachment of a security interest in the mower when it filed the financing statement on May 1. 
D)  The security interest has not attached,but attachment is unimportant to enforceability of a security interest.

Exam 15: Secured Transactions

To perfect a security interest in a negotiable instrument,Second State Savings and Loan should:

Fowler Bros.has applied to Gibralter Bank for a $50,000 loan for its business expansion.If Fowler Bros.plans to use its account at Gibralter Bank as collateral,discuss what the bank needs to do for a security interest to attach.

Which of the following is true about a PMSI?

Spicy & Hot,Inc.is interested in expanding its Mexican food restaurant into a Mexican food catering business.Spicy & Hot,Inc.buys a new delivery van from Van World.Spicy & Hot,Inc.is a buyer in the ordinary course of business when purchasing the van.

What is the definition of default?

Explain the difference between attachment and perfection.

Wedney,Inc.sold a meat processing machine to Yoro Chickens,taking a security interest in the machine.Yoro Chickens defaulted on the loan.Wedney repossessed the machine.Wedney would like to retain the machine to use as a model.Which of the following statements is correct?

What must be done when a debtor pays off the debt secured by a security interest in goods?

Donna defaulted on her loan owed to Second State Savings and Loan.The loan was secured with Donna's car.Donna used the car for personal and family reasons.Which statement is correct?

The initial term for which a financing statement will be effective is:

For a security interest to attach,there must be an agreement.

Which of the following may not be used as collateral within the scope of UCC Article 9?

First Federal had a perfected security interest in Vicor's printing press.Second Credit had a security interest in the same press,but its interest was not perfected.First Federal takes priority over Second Credit.

What are the duties of the secured party when it is disposing of collateral upon a default.

One of the more secure methods of perfection is taking possession of the collateral.

In 2012 The National Conference of Commissioners on Uniform Satte Laws created a set of amendments to Article 9 of the UCC. What is true about these amendments.

A security interest in money may be perfected by:

Which of the following parties can defeat a perfected security interest?

On April 10,Amy agreed to buy a riding lawn mower from Mowers Plus,signing a promissory note and security agreement giving Mowers Plus a security interest in the mower.On April 15,Amy took delivery of the mower.On May 1,Mowers Plus filed a financing statement.Which of the following is correct?

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