Question 1

The concept of a floating lien applies to a constantly changing inventory.

Accepted Answer

A) True 
 B)False

Question 2

On default, unless the security agreement states otherwise, the secured party has the right to take possession of the collateral.

Accepted Answer

A) True 
 B)False

Question 3

The person who owes the payment of a secured obligation is the secured party.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

A financing statement must include the creditor's signature.

Accepted Answer

A) True 
 B)False

Question 6

The payment of Waldo's debt to Main Street Bank is guaranteed by Waldo'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.E) B) and D)
F) A) and B)

Question 7

Jason is the creditor in a transaction with Carol, who is the debtor. Which of the following requirements is not necessary for Jason to have an enforceable security interest?

Accepted Answer

A)   The collateral must be in Jason's possession, or there must be a written or authenticated security agreement.
B)   Jason must give value to Carol.
C)   Carol must have rights to the collateral.
D)   The collateral must be tangible.E) A) and B)
F) All of the above

Question 8

Perfection refers to the quality of the collateral that secures a creditor's interest in a debtor's debt.

Accepted Answer

A) True 
 B)False

Question 9

Proceeds consist of whatever is received when collateral is sold.

Accepted Answer

A) True 
 B)False

Question 10

A debtor is the person in whose favor there is a security interest.

Accepted Answer

A) True 
 B)False

Question 11

A financing statement cannot be the same as the security agreement.

Accepted Answer

A) True 
 B)False

Question 12

A financing statement is effective for five years from the date of filing.

Accepted Answer

A) True 
 B)False

Question 13

In most situations, a termination statement must be filed or sent within twenty days after the debt is paid.

Accepted Answer

A) True 
 B)False

Question 14

A security agreements may provide for coverage of after-acquired property.

Accepted Answer

A) True 
 B)False

Question 15

A financing statement must include a description of the collateral by type or item.

Accepted Answer

A) True 
 B)False

Question 16

Sally is the secured party in a transaction with Lilly, who is the debtor. Sally files a financing statement with the appropriate state official. The financing statement must contain

Accepted Answer

A)   Lilly's signature.
B)   Sally's bank account information.
C)   Lilly's credit report.
D)   a photograph of the collateral.E) None of the above
F) C) and D)

Question 17

The failure to pay a debt as promised is known as default.

Accepted Answer

A) True 
 B)False

Question 18

Future advances against a line of credit can be subject to the same collateral.

Accepted Answer

A) True 
 B)False

Question 19

Idle Investments, Inc., and Harbor Bank are secured parties with security interests in property owned by GR8 Manufacturing Corporation. Priority between these security interests is generally determined by

Accepted Answer

A)   the amount of the claim.
B)   the custom in the trade.
C)   the time of perfection.
D)   the time the security agreement was signed.E) B) and D)
F) A) and B)

Question 20

Lena borrows from Mac and Nicol, using the same farm equipment as collateral for both loans. Only Nicol has a perfected security interest. Lena defaults on both loans. The party with first rights to the collateral is

Accepted Answer

A)   Lena.
B)   Mac and Nicol, in proportion to Lena's debt to each.
C)   Mac only.
D)   Nicol only.E) B) and C)
F) None of the above

Exam 20: Secured Transactions

Sally is the secured party in a transaction with Lilly, who is the debtor. Sally files a financing statement with the appropriate state official. The financing statement must contain

Correct AnswerverifiedShow Answer

A financing statement cannot be the same as the security agreement.

Correct AnswerverifiedShow Answer

A debtor is the person in whose favor there is a security interest.

Correct AnswerverifiedShow Answer

The concept of a floating lien applies to a constantly changing inventory.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The payment of Waldo's debt to Main Street Bank is guaranteed by Waldo's personal property. This is governed by

Correct AnswerverifiedShow Answer

In most situations, a termination statement must be filed or sent within twenty days after the debt is paid.

Correct AnswerverifiedShow Answer

A financing statement is effective for five years from the date of filing.

Correct AnswerverifiedShow Answer

A security agreements may provide for coverage of after-acquired property.

Correct AnswerverifiedShow Answer

The person who owes the payment of a secured obligation is the secured party.

Correct AnswerverifiedShow Answer

A financing statement must include the creditor's signature.

Correct AnswerverifiedShow Answer

On default, unless the security agreement states otherwise, the secured party has the right to take possession of the collateral.

Correct AnswerverifiedShow Answer

Future advances against a line of credit can be subject to the same collateral.

Correct AnswerverifiedShow Answer

Lena borrows from Mac and Nicol, using the same farm equipment as collateral for both loans. Only Nicol has a perfected security interest. Lena defaults on both loans. The party with first rights to the collateral is

Correct AnswerverifiedShow Answer

Jason is the creditor in a transaction with Carol, who is the debtor. Which of the following requirements is not necessary for Jason to have an enforceable security interest?

Correct AnswerverifiedShow Answer

Idle Investments, Inc., and Harbor Bank are secured parties with security interests in property owned by GR8 Manufacturing Corporation. Priority between these security interests is generally determined by

Correct AnswerverifiedShow Answer

The failure to pay a debt as promised is known as default.

Correct AnswerverifiedShow Answer

A financing statement must include a description of the collateral by type or item.

Correct AnswerverifiedShow Answer

Perfection refers to the quality of the collateral that secures a creditor's interest in a debtor's debt.

Correct AnswerverifiedShow Answer

Proceeds consist of whatever is received when collateral is sold.

Correct AnswerverifiedShow Answer

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