Question 1

A bond, which guarantees the performance of the terms of a contract, is a(n):

Accepted Answer

A)  judicial bond. 
B)  official bond. 
C)  performance bond. 
D)  fidelity bond. 
A)  judicial bond. 
B)  official bond. 
C)  performance bond. 
D)  fidelity bond.

Question 2

Thomas borrowed $100,000 from First Bank, which asked that he both put up collateral and provide a surety. Consequently Thomas provided the bank with a security interest in his antique car collection and asked Victor to act as a surety. Victor agreed to do so and signed a surety agreement with the bank. Thomas made several payments on the loan and then asked First Bank for permission to sell three of his cars. First Bank agreed, but it never notified Victor of the sale of the collateral. Thomas then defaults on the loan. First Bank now wants Victor to pay the remainder of the loan. Must Victor pay? Explain.

Accepted Answer

Thomas, who is the principal debtor, and

Question 3

Under the Code, collateral is classified according to:

Accepted Answer

A)  its nature and use. 
B)  the fundamental rights of the secured party. 
C)  the fundamental rights of the debtor. 
D)  its value. 
A)  its nature and use. 
B)  the fundamental rights of the secured party. 
C)  the fundamental rights of the debtor. 
D)  its value.

Question 4

A buyer in the ordinary course of business takes collateral (other than farm products) free of any security interest created by the buyer's seller, even if the security interest is perfected and the buyer knows of its existence.

Accepted Answer

A) True 
 B)False

Question 5

Hank's tractor is collateral for a loan and Hank moves to the next county. In most states, the security instrument must be re-filed in the proper county or it will render the security interest ineffective.

Accepted Answer

A) True 
 B)False

Question 6

A bankruptcy trustee may invalidate a granting of a security interest from the debtor if it was made on the date of or within 90 days before the filing of the bankruptcy petition and it was for the benefit of a creditor for an antecedent debt and was made before the debtor became insolvent.

Accepted Answer

A) True 
 B)False

Question 7

A PMSI is created in goods when a seller retains a security interest in the goods sold on credit by a security agreement.

Accepted Answer

A) True 
 B)False

Question 8

A primary reason for requiring a surety is to reduce the creditor's risk of loss.

Accepted Answer

A) True 
 B)False

Question 9

A security interest in consumer goods is always automatically perfected upon attachment.

Accepted Answer

A) True 
 B)False

Question 10

The right of a surety who has paid the creditor to be repaid by the principal debtor is:

Accepted Answer

A)  exoneration. 
B)  subrogation. 
C)  reimbursement. 
D)  None of these. 
A)  exoneration. 
B)  subrogation. 
C)  reimbursement. 
D)  None of these.

Question 11

If the debtor is in default and the secured party wants to repossess the collateral in order to sell it, he must get a court order to do so.

Accepted Answer

A) True 
 B)False

Question 12

Every consensual secured transaction involves:

Accepted Answer

A)  a debtor and  a secured party. 
B)  collateral. 
C)  a security agreement and a security interest. 
D)  All of these. 
A)  a debtor and  a secured party. 
B)  collateral. 
C)  a security agreement and a security interest. 
D)  All of these.

Question 13

Article 9 of the UCC governs financing transactions involving security interests in real property.

Accepted Answer

A) True 
 B)False

Question 14

Article 9 of the UCC is flexible, simple, and it allows a variety of forms of secured financing.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true?

Accepted Answer

A)  A security agreement may create or provide for a security interest in property that the debtor presently does not own or have rights to. 
B)  Obligations covered by a security agreement may not include future advances. 
C)  Federal regulation allows a credit seller or lender to obtain a nonpossessory security interest in a consumer's household goods, such as furniture, appliances, and clothing, whether as a purchase money security interest or otherwise. 
D)  Encryption of a record cannot serve as a debtor's authentication of a security agreement. 
A)  A security agreement may create or provide for a security interest in property that the debtor presently does not own or have rights to. 
B)  Obligations covered by a security agreement may not include future advances. 
C)  Federal regulation allows a credit seller or lender to obtain a nonpossessory security interest in a consumer's household goods, such as furniture, appliances, and clothing, whether as a purchase money security interest or otherwise. 
D)  Encryption of a record cannot serve as a debtor's authentication of a security agreement.

Question 16

A purchaser of a house who buys the property "subject to" the mortgage is not personally liable for the mortgage, nor is he a surety for the mortgage obligation.

Accepted Answer

A) True 
 B)False

Question 17

Bill lends Harvey $1,500 and the loan is secured by Harvey's furniture. If Bill files a financing statement on January 30, 2012 how long will it be effective?

Accepted Answer

A)  Until July 30, 2012. 
B)  Until January 30, 2017. 
C)  Until January 30, 2032 
D)  For 30 days. 
A)  Until July 30, 2012. 
B)  Until January 30, 2017. 
C)  Until January 30, 2032 
D)  For 30 days.

Question 18

Steve defaults on a car loan secured by his car and guaranteed by both Sam and Dave. Subrogation would allow Sam, who paid Steve's full obligation to:

Accepted Answer

A)  repossess the car. 
B)  collect from Dave. 
C)  collect from Steve. 
D)  All of these. 
A)  repossess the car. 
B)  collect from Dave. 
C)  collect from Steve. 
D)  All of these.

Question 19

The types of indispensable paper include:

Accepted Answer

A)  chattel paper. 
B)  instruments. 
C)  documents. 
D)  All of these. 
A)  chattel paper. 
B)  instruments. 
C)  documents. 
D)  All of these.

Question 20

Attachment must occur in order to make a security interest enforceable against the debtor and against third parties.

Accepted Answer

A) True 
 B)False

Exam 37: Secured Transactions and Suretyship

A bond, which guarantees the performance of the terms of a contract, is a(n):

Under the Code, collateral is classified according to:

A buyer in the ordinary course of business takes collateral (other than farm products) free of any security interest created by the buyer's seller, even if the security interest is perfected and the buyer knows of its existence.

Hank's tractor is collateral for a loan and Hank moves to the next county. In most states, the security instrument must be re-filed in the proper county or it will render the security interest ineffective.

A bankruptcy trustee may invalidate a granting of a security interest from the debtor if it was made on the date of or within 90 days before the filing of the bankruptcy petition and it was for the benefit of a creditor for an antecedent debt and was made before the debtor became insolvent.

A PMSI is created in goods when a seller retains a security interest in the goods sold on credit by a security agreement.

A primary reason for requiring a surety is to reduce the creditor's risk of loss.

A security interest in consumer goods is always automatically perfected upon attachment.

The right of a surety who has paid the creditor to be repaid by the principal debtor is:

If the debtor is in default and the secured party wants to repossess the collateral in order to sell it, he must get a court order to do so.

Every consensual secured transaction involves:

Article 9 of the UCC governs financing transactions involving security interests in real property.

Article 9 of the UCC is flexible, simple, and it allows a variety of forms of secured financing.

Which of the following is true?

A purchaser of a house who buys the property "subject to" the mortgage is not personally liable for the mortgage, nor is he a surety for the mortgage obligation.

Bill lends Harvey $1,500 and the loan is secured by Harvey's furniture. If Bill files a financing statement on January 30, 2012 how long will it be effective?

Steve defaults on a car loan secured by his car and guaranteed by both Sam and Dave. Subrogation would allow Sam, who paid Steve's full obligation to:

The types of indispensable paper include:

Attachment must occur in order to make a security interest enforceable against the debtor and against third parties.

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