Question 1

A bond,which is an evidence of indebtedness,may serve as collateral.

Accepted Answer

A) True 
 B)False  True

Question 2

A creditor will have to exhaust all the possible legal procedures to try to collect from the principal debtor before he can collect from a conditional guarantor of collection.

Accepted Answer

A) True 
 B)False  True

Question 3

Kay borrowed $200,000 for her business.First Bank loaned the money but required a surety and collateral.Kay put up her boat,valued at $110,000,and Anson agreed to guarantee the entire loan.After Kay had paid $50,000 of the loan,she asked First Bank to release the collateral since she wanted to sell it to her brother.The bank looked at her perfect payment record and agreed.Two weeks later,she sold the business,took the boat to Brazil,and never was heard from again.Can First Bank collect from Anson?

Accepted Answer

A)   No,since they released the collateral
B)   Yes,but only $40,000
C)   Yes,but only $90,000
D)   Yes,and they can get the whole remaining obligation C

Question 4

If the principal debtor defaults,the surety has rights against the principal debtor,third parties,and cosureties.These rights would include:

Accepted Answer

A)   exoneration.
B)   reimbursement.
C)   subrogation.
D)   All of these.

Question 5

A dealer sells goods on credit to a buyer who uses the goods as equipment.The dealer keeps a purchase money security interest in the goods.The dealer then borrows against the security agreement of the buyer along with the dealer's security interest in the collateral.The collateral provided by the dealer to his lender in this type of transaction is:

Accepted Answer

A)   investment property.
B)   chattel paper.
C)   a document of title.
D)   negotiable instruments.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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

The answer of Thomas borrowed $100,000 from First Bank,which asked...

Question 8

A defense that can only be asserted by the principal debtor is called a ____ defense.

Accepted Answer

A)   real
B)   subrogated
C)   personal
D)   joint

Question 9

A discharge of the principal debtor's obligation in bankruptcy does not discharge the surety's liability to the creditor on that obligation.

Accepted Answer

A) True 
 B)False

Question 10

Substantial compliance with Article 9's financing statement requirements is sufficient for a valid perfection,despite minor errors in the statement that are not seriously misleading.

Accepted Answer

A) True 
 B)False

Question 11

Elmer agreed to act as the conditional guarantor of collection on a debt of $50,000 that Fred owed to Gloria.Fred paid Elmer a premium to serve as surety.If Fred defaults on the debt,what are Gloria's rights against Elmer?

Accepted Answer

The answer of Elmer agreed to act as the conditional...

Question 12

Jill owns and operates a donut shop.Under the Code,the flour,sugar,and other goods used by Jill to make donuts are classified as:

Accepted Answer

A)   farm products.
B)   ingredients.
C)   consumer goods.
D)   inventory.

Question 13

Mr.Chickilini is a surety for Wayne on a debt owed to Melvin.If Wayne fails to pay,what defenses might Mr.Chickilini have to avoid payment of the debt?

Accepted Answer

The answer of Mr.Chickilini is a surety for Wayne on...

Question 14

Revised Article 9 of the Code greatly complicates the provisions regarding the place(s)for filing a financing statement.

Accepted Answer

A) True 
 B)False

Question 15

Conner lends Harvey $2000 and the loan is secured by Harvey's furniture.If Conner files a financing statement on January 30,2018,how long will he keep his security interest?

Accepted Answer

A)   Until July 30,2018
B)   Until January 30,2021
C)   Until July 30,2019,unless a continuation statement is filed
D)   Until January 30,2028,if a continuation statement is filed

Question 16

A buyer of goods who buys without knowledge of a security interest,for value,and primarily for personal,family,or household purposes takes the goods:

Accepted Answer

A)   subject to any purchase money security interest automatically perfected.
B)   subject to all security interests in the goods.
C)   free of any purchase money security interest automatically perfected.
D)   free of a security interest perfected by filing.

Question 17

Indispensable paper includes:

Accepted Answer

A)   documents of title.
B)   accounts receivable for a business.
C)   patents.
D)   a contract evidencing literary rights.

Question 18

Gary owns and operates a farm and a farm machinery dealership.Under the Code,a new tractor that Gary has for sale at his dealership is classified as:

Accepted Answer

A)   a personal possession.
B)   equipment.
C)   consumer goods.
D)   inventory.

Question 19

Which of the following is NOT a method by which a security interest be perfected in collateral?

Accepted Answer

A)   By the secured party's filing a financing statement in the designated public office
B)   By the secured party's taking or retaining possession of the collateral
C)   Automatically,on the attachment of the security interest
D)   By the secured party having a signed agreement describing the collateral in detail.

Question 20

UCC Article 9 defines a secondary obligor as being a consignee.

Accepted Answer

A) True 
 B)False

Exam 37: Secured Transactions and Suretyship

A bond,which is an evidence of indebtedness,may serve as collateral.

A creditor will have to exhaust all the possible legal procedures to try to collect from the principal debtor before he can collect from a conditional guarantor of collection.

If the principal debtor defaults,the surety has rights against the principal debtor,third parties,and cosureties.These rights would include:

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

A defense that can only be asserted by the principal debtor is called a ____ defense.

A discharge of the principal debtor's obligation in bankruptcy does not discharge the surety's liability to the creditor on that obligation.

Substantial compliance with Article 9's financing statement requirements is sufficient for a valid perfection,despite minor errors in the statement that are not seriously misleading.

Elmer agreed to act as the conditional guarantor of collection on a debt of $50,000 that Fred owed to Gloria.Fred paid Elmer a premium to serve as surety.If Fred defaults on the debt,what are Gloria's rights against Elmer?

Jill owns and operates a donut shop.Under the Code,the flour,sugar,and other goods used by Jill to make donuts are classified as:

Mr.Chickilini is a surety for Wayne on a debt owed to Melvin.If Wayne fails to pay,what defenses might Mr.Chickilini have to avoid payment of the debt?

Revised Article 9 of the Code greatly complicates the provisions regarding the place(s)for filing a financing statement.

Conner lends Harvey $2000 and the loan is secured by Harvey's furniture.If Conner files a financing statement on January 30,2018,how long will he keep his security interest?

A buyer of goods who buys without knowledge of a security interest,for value,and primarily for personal,family,or household purposes takes the goods:

Indispensable paper includes:

Gary owns and operates a farm and a farm machinery dealership.Under the Code,a new tractor that Gary has for sale at his dealership is classified as:

Which of the following is NOT a method by which a security interest be perfected in collateral?

UCC Article 9 defines a secondary obligor as being a consignee.