Question 1

The payment of Linda's debt to Pat is guaranteed by Linda's personal property. Pat is most likely to perfect her interest by​

Accepted Answer

A)  ​insuring Linda's property for the full amount of its value. 
B)  ​calculating the precise amount of Linda's debt. 
C)  ​correcting grammatical errors in the parties' written agreement. 
D)  ​filing a financing statement with the appropriate authority. 
A)  ​insuring Linda's property for the full amount of its value. 
B)  ​calculating the precise amount of Linda's debt. 
C)  ​correcting grammatical errors in the parties' written agreement. 
D)  ​filing a financing statement with the appropriate authority.

Question 2

A purchase-money security interest (PMSI) in consumer goods is perfected automatically at the time the PMSI is created.

Accepted Answer

A) True 
 B)False

Question 3

A buyer in the ordinary course of business has priority even if a previously perfected security interest exists as to the goods.

Accepted Answer

A) True 
 B)False

Question 4

To create an enforceable security interest, the secured party must give something of value to a debtor's other creditors.

Accepted Answer

A) True 
 B)False

Question 5

Proceeds are whatever is received when collateral is sold.

Accepted Answer

A) True 
 B)False

Question 6

Any breach of the terms of the security agreement can constitute default.

Accepted Answer

A) True 
 B)False

Question 7

AAA Loans, Inc., holds a security interest in kitchen and restaurant equipment owned by Brunch n' Lunch Bistro. AAA assigns its interest in the equipment to Commercial Investments Corporation. Commercial Investments becomes the secured party of record​

Accepted Answer

A)  ​automatically. 
B)  ​if AAA advises Brunch n' Lunch of the assignment. 
C)  ​if Commercial Investments advises Brunch n' Lunch of the assignment. 
D)  ​if Commercial Investments files a uniform amendment form. 
A)  ​automatically. 
B)  ​if AAA advises Brunch n' Lunch of the assignment. 
C)  ​if Commercial Investments advises Brunch n' Lunch of the assignment. 
D)  ​if Commercial Investments files a uniform amendment form.

Question 8

A security interest is enforceable only if the collateral is in the secured party's possession.

Accepted Answer

A) True 
 B)False

Question 9

Efrem owns Fans & Players, a retail sporting goods shop. When Great Hill Lodge, a new ski resort, is built in the area, Efrem decides to expand and borrows a large sum from Hometown Bank. The bank takes a security interest in Efrem's present inventory and any after-acquired inventory as collateral for the loan. The bank properly perfects the security interest by filing a financing statement. Efrem's business is profitable, and he begins doubling his inventory. A year later, an avalanche destroys the ski slope and lodge. Efrem's business takes a turn for the worse, and he defaults on his debt to the bank. The bank seeks possession of his entire inventory, even though the inventory is twice as large as it was when the loan was made. Efrem claims that the bank has rights to only half of his inventory. Is Efrem correct? Explain.

Accepted Answer

No. Hometown Bank will prevail because i

Question 10

A security interest is enforceable only if the debtor has title to the collateral.

Accepted Answer

A) True 
 B)False

Question 11

The payment of Mo's debt to Neil is guaranteed by Mo's personal property. This is governed by​

Accepted Answer

A)  ​the Uniform Commercial Code. 
B)  ​the Federal Trade Commission. 
C)  ​the U.S. Constitution's commerce clause. 
D)  ​the Bankruptcy Reform Act of 2005. 
A)  ​the Uniform Commercial Code. 
B)  ​the Federal Trade Commission. 
C)  ​the U.S. Constitution's commerce clause. 
D)  ​the Bankruptcy Reform Act of 2005.

Question 12

A financing statement must include the creditor's signature.

Accepted Answer

A) True 
 B)False

Question 13

City Bank's financing statement in collateral owned by Delta Corporation will expire in less than a year. Filed timely, a continuation statement could extend the effectiveness of the financing statement for​

Accepted Answer

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

Question 14

The payment of Brian's debt to Chuck is guaranteed by Brian's personal property. This is

Accepted Answer

A)  an attachment. 
B)  ​a secured transaction. 
C)  ​perfection. 
D)  ​a violation of most state laws. 
A)  an attachment. 
B)  ​a secured transaction. 
C)  ​perfection. 
D)  ​a violation of most state laws.

Question 15

A security interest cannot become perfected unless a financing statement is filed.

Accepted Answer

A) True 
 B)False

Question 16

Fact Pattern 20-1
General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from Business Finance Corporation for a security interest in the equipment. The next day, GLC borrows $500,000 from Commercial Bank, also for a security interest in the equipment. GLC defaults on the loans.
-Refer to Fact Pattern 20-1.Suppose that two weeks after GLC takes possession of the equipment, Business Finance and Commercial Bank file financing statements, with Interstate filing first. In that circumstance, the party with priority to the equipment is​

Accepted Answer

A)  ​GLC. 
B)  ​Business Finance and Commercial Bank proportionately. 
C)  ​Business Finance only. 
D)  ​Commercial Bank only. 
A)  ​GLC. 
B)  ​Business Finance and Commercial Bank proportionately. 
C)  ​Business Finance only. 
D)  ​Commercial Bank only.

Question 17

Olaf is the creditor in a transaction with Phil. Once certain requirements are met, Olaf's rights will attach, which means that Olaf will have​

Accepted Answer

A)  ​an indivisible ownership right to Phil's property. 
B)  ​an enforceable security interest in Phil's property. 
C)  ​a notice affixed to Phil's property. 
D)  ​the permission of a court to seize Phil's property. 
A)  ​an indivisible ownership right to Phil's property. 
B)  ​an enforceable security interest in Phil's property. 
C)  ​a notice affixed to Phil's property. 
D)  ​the permission of a court to seize Phil's property.

Question 18

The payment of Hu's debt to Intrastate Bank is guaranteed by Hu's personal property. To give notice of its interest in Hu's property to other creditors, the bank is most likely to​

Accepted Answer

A)  ​attach a bright label to Hu's property. 
B)  ​e-mail other potential creditors. 
C)  ​file a financing statement with the appropriate authority. 
D)  ​publish a collection notice in local newspapers. 
A)  ​attach a bright label to Hu's property. 
B)  ​e-mail other potential creditors. 
C)  ​file a financing statement with the appropriate authority. 
D)  ​publish a collection notice in local newspapers.

Question 19

A purchase-money security interest in consumer goods is created when a person buys the goods on credit.

Accepted Answer

A) True 
 B)False

Question 20

The first security interest to be perfected is the last in priority over any other perfected security interests.

Accepted Answer

A) True 
 B)False

Exam 20: Secured Transactions

The payment of Linda's debt to Pat is guaranteed by Linda's personal property. Pat is most likely to perfect her interest by​

A purchase-money security interest (PMSI) in consumer goods is perfected automatically at the time the PMSI is created.

A buyer in the ordinary course of business has priority even if a previously perfected security interest exists as to the goods.

To create an enforceable security interest, the secured party must give something of value to a debtor's other creditors.

Proceeds are whatever is received when collateral is sold.

Any breach of the terms of the security agreement can constitute default.

AAA Loans, Inc., holds a security interest in kitchen and restaurant equipment owned by Brunch n' Lunch Bistro. AAA assigns its interest in the equipment to Commercial Investments Corporation. Commercial Investments becomes the secured party of record​

A security interest is enforceable only if the collateral is in the secured party's possession.

A security interest is enforceable only if the debtor has title to the collateral.

The payment of Mo's debt to Neil is guaranteed by Mo's personal property. This is governed by​

A financing statement must include the creditor's signature.

City Bank's financing statement in collateral owned by Delta Corporation will expire in less than a year. Filed timely, a continuation statement could extend the effectiveness of the financing statement for​

The payment of Brian's debt to Chuck is guaranteed by Brian's personal property. This is

A security interest cannot become perfected unless a financing statement is filed.

Olaf is the creditor in a transaction with Phil. Once certain requirements are met, Olaf's rights will attach, which means that Olaf will have​

The payment of Hu's debt to Intrastate Bank is guaranteed by Hu's personal property. To give notice of its interest in Hu's property to other creditors, the bank is most likely to​

A purchase-money security interest in consumer goods is created when a person buys the goods on credit.

The first security interest to be perfected is the last in priority over any other perfected security interests.

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The payment of Linda's debt to Pat is guaranteed by Linda's personal property. Pat is most likely to perfect her interest by

AAA Loans, Inc., holds a security interest in kitchen and restaurant equipment owned by Brunch n' Lunch Bistro. AAA assigns its interest in the equipment to Commercial Investments Corporation. Commercial Investments becomes the secured party of record

The payment of Mo's debt to Neil is guaranteed by Mo's personal property. This is governed by

City Bank's financing statement in collateral owned by Delta Corporation will expire in less than a year. Filed timely, a continuation statement could extend the effectiveness of the financing statement for

Olaf is the creditor in a transaction with Phil. Once certain requirements are met, Olaf's rights will attach, which means that Olaf will have

The payment of Hu's debt to Intrastate Bank is guaranteed by Hu's personal property. To give notice of its interest in Hu's property to other creditors, the bank is most likely to