Question 1

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.

Question 2

Great State Bank and First Federal Bank have a security interest in TriColor's equipment.If neither secured party is perfected,the first to sue or repossess has priority over the collateral.

Accepted Answer

A) True 
 B)False

Question 3

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.

Question 4

Which of the following is correct concerning termination statements?

Accepted Answer

A) A termination statement must be filed by a secured party when a debtor has defaulted on a loan. 
B) For consumer debt, the secured party must complete a termination statement in every place that it filed a financing statement. 
C) The secured party must file a termination statement within 30 days of a consumer debtor's demand, provided the debtor has paid the full debt. 
D) A termination statement indicates that a secured party is transferring its rights to collateral to another party.

Question 5

Landscaper Lottie used her machinery,employee labor,and her expertise to landscape Opal's new guest home.Opal fails to pay for the landscaping because she has run out of money.Lottie files a lien against the real property.This lien is called

Accepted Answer

A) an artisan's lien; her landscape design is a work of art. 
B) a landlord's lien; Opal is planning to rent the guest house to a tenant. 
C) a mechanic's lien; it was created by improving real property. 
D) a purchase money security interest.

Question 6

A PMSI in consumer goods perfects automatically,without filing.

Accepted Answer

A) True 
 B)False

Question 7

There is no way to attach a security interest in electronic chattel paper.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

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

Question 9

Which of the following is an example of a purchase money security interest in consumer goods?

Accepted Answer

A) A doctor purchasing a computer on credit to create a Webpage to make services and information available to her patients 
B) A doctor purchasing on credit a blood glucose monitor to check his own blood sugar levels 
C) A doctor purchasing a TV/VCR unit on credit to place in her office waiting room 
D) A doctor purchasing an exercise bike for his employees to use over the lunch hour

Question 10

If repossessed collateral is sold or otherwise disposed of by the creditor,then the time,place,manner,and method of disposal must be

Accepted Answer

A) commercially reasonable. 
B) scheduled with the debtor so that the debtor is able to attend. 
C) court ordered. 
D) perfected.

Question 11

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.

Question 12

Wedney,Inc.has a purchase money security interest in one of Yoro Chicken's meat processing machines.Wedney filed a financing statement on the day the machine was delivered,perfecting its interest.Great State Bank already had a security interest in the machine.Which party has superior priority rights in the meat processing machine?

Accepted Answer

A) Wedney.A PMSI in collateral other than inventory takes priority over a conflicting security interest if the PMSI is perfected at the time the debtor receives the collateral or within 20 days after he receives it. 
B) Great State Bank, since it had an earlier security interest. 
C) The party who is first to repossess the collateral has priority rights. 
D) The creditors have equal priority.

Question 13

First Federal loaned Madeline $20,000 to purchase a new van.The van was for Madeline's personal and family use.First Federal's security interest is a purchase money security interest which perfects only upon filing a financing statement.

Accepted Answer

A) True 
 B)False

Question 14

Florence borrows $1,500 from Fremont,leaving her gold necklace with Fremont as collateral.Two weeks earlier,Florence had borrowed $1,000 from Corner Bank.Florence signed a security agreement and a financing statement giving Corner Bank a security interest in the same gold necklace.The financing statement is filed in the appropriate location.If Florence defaults on both loans,which creditor has the superior rights to the necklace?

Accepted Answer

A) Fremont, because his loan was the first to attach. 
B) Fremont, because possession takes priority over filing. 
C) Corner Bank, because Fremont did not perfect his interest. 
D) Corner Bank, because Fremont did not have a written security agreement.

Question 15

All but which of the following may be used as collateral in a secured transaction under UCC Article 9?

Accepted Answer

A) Stocks and bonds 
B) Personal injury tort claims of individuals 
C) Intellectual property rights 
D) A computer program if, by purchasing a computer, the buyer of the computer acquires the right to use that embedded program

Question 16

When two creditors have a security interest in the same collateral,which party takes priority?

Accepted Answer

A) The first unperfected party to attach 
B) A party with an unperfected interest 
C) A party with a perfected interest 
D) The first perfected party to sue

Question 17

Country Bank,located in Indiana,loaned Chmelik $5,000 and obtained a security interest in a copyright Chmelik owns.Chmelik lives in Illinois,but works in Indiana.In order to perfect its interest,Country Bank files a financing statement in Indiana.The financing statement provides Chmelik's correct name,his business address,and a reasonable description of the copyright used as collateral.Is the financing statement sufficient?

Accepted Answer

A) Yes, it meets the UCC requirements for contents and filing. 
B) No, if the debtor is an individual, the secured party must file in the state of the debtor's principal residence, which in this case would be Illinois. 
C) No, the secured party needed to file a financing statement in both Indiana and Illinois. 
D) No, a security interest cannot be attached to a copyright.

Question 18

Faith owns a copyright in a book she recently wrote.She applies for a $10,000 loan through Cumberland Bank and wants to use the copyright as collateral.Explain if and how the bank can perfect a security interest in such collateral.

Accepted Answer

The answer of Faith owns a copyright in a book...

Question 19

Byron bought a 50' yacht from Myrtle's Marina by entering into a note and security agreement promising the yacht as collateral for the purchase money security interest.When Byron faced some tough financial times,he failed to make three monthly payments.Myrtle's Marina repossessed the yacht by removing the yacht engine and advertised a public auction of the yacht.Byron appealed to his good friend Charles and managed to pay off the debt balance and the Marina's expenses of repossessing and advertising the sale.Byron's actions represent

Accepted Answer

A) strict foreclosure. 
B) redemption. 
C) silent bidding at the auction. 
D) an artisan's lien.

Question 20

The series of steps a secured party must take to protect its rights in the collateral against people other than the debtor is called

Accepted Answer

A) authentication. 
B) recording. 
C) obligating. 
D) perfection.

Exam 24: Secured Transactions

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

Great State Bank and First Federal Bank have a security interest in TriColor's equipment.If neither secured party is perfected,the first to sue or repossess has priority over the collateral.

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?

Which of the following is correct concerning termination statements?

Landscaper Lottie used her machinery,employee labor,and her expertise to landscape Opal's new guest home.Opal fails to pay for the landscaping because she has run out of money.Lottie files a lien against the real property.This lien is called

A PMSI in consumer goods perfects automatically,without filing.

There is no way to attach a security interest in electronic chattel paper.

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

Which of the following is an example of a purchase money security interest in consumer goods?

If repossessed collateral is sold or otherwise disposed of by the creditor,then the time,place,manner,and method of disposal must be

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

First Federal loaned Madeline $20,000 to purchase a new van.The van was for Madeline's personal and family use.First Federal's security interest is a purchase money security interest which perfects only upon filing a financing statement.

All but which of the following may be used as collateral in a secured transaction under UCC Article 9?

When two creditors have a security interest in the same collateral,which party takes priority?

Faith owns a copyright in a book she recently wrote.She applies for a $10,000 loan through Cumberland Bank and wants to use the copyright as collateral.Explain if and how the bank can perfect a security interest in such collateral.

The series of steps a secured party must take to protect its rights in the collateral against people other than the debtor is called