Question 1

A security interest can be perfected merely by possession of the collateral by the secured party.

Accepted Answer

A) True 
 B)False

Question 2

Fourthbank lent $50,000 to Mary,and took a security interest in 1,000 shares of Mary's stock in Specialized Motors.The bank took possession of the stock certificates.Mary then borrowed $20,000 from her brother,and signed a security agreement with her brother.Her brother immediately filed a financing statement.If the stock is worth $60,000 and Mary defaults on both loans,what is the outcome?

Accepted Answer

A)  Fourthbank gets $50,000 and her brother gets $10,000. 
B)  Fourthbank gets $40,000 and her brother gets $20,000. 
C)  Fourthbank and her brother split the proceeds in a 5:2 ratio. 
D)  Her brother gets $20,000 and Fourthbank gets nothing. 
E)  Fourthbank gets $50,000 and her brother gets nothing. 
A)  Fourthbank gets $50,000 and her brother gets $10,000. 
B)  Fourthbank gets $40,000 and her brother gets $20,000. 
C)  Fourthbank and her brother split the proceeds in a 5:2 ratio. 
D)  Her brother gets $20,000 and Fourthbank gets nothing. 
E)  Fourthbank gets $50,000 and her brother gets nothing.

Question 3

Article 9 of the UCC governs secured transactions in personal property.

Accepted Answer

A) True 
 B)False

Question 4

Sandy purchases a piece of equipment to use in her business.The seller of the equipment extended credit to Sandy to enable her to purchase the equipment.Sandy signs a security agreement,but the seller of the equipment does not file a financing statement anywhere.Sandy defaults on the loan and the seller of the equipment wants to get possession of the equipment.Can the seller repossess the equipment?

Accepted Answer

A)  No,because the equipment is not consumer goods. 
B)  No,because the seller did not file a financing statement. 
C)  Yes,because there is a valid security agreement. 
D)  Yes,because there is automatic perfection. 
A)  No,because the equipment is not consumer goods. 
B)  No,because the seller did not file a financing statement. 
C)  Yes,because there is a valid security agreement. 
D)  Yes,because there is automatic perfection.

Question 5

Alice buys a home theater system from Blastaphonic Audio and Video,paying cash.Alice was aware that Fourth National Bank had a perfected security interest in all the inventory of Blastaphonic.Which of the following statements is true?

Accepted Answer

A)  The home theater system is not subject to a security interest once Alice purchases it. 
B)  The home theater system remains subject to the security interest of Fourth National Bank because Alice had actual knowledge of the security interest. 
C)  The home theater system is not subject to a security interest once Alice purchases it so long as the remaining inventory of Blastaphonic is adequate to secure the amount of the indebtedness. 
D)  The home theater system remains subject to the security interest of Fourth National Bank,and this would be true even if Alice was not aware of Fourth National Bank's security interest. 
A)  The home theater system is not subject to a security interest once Alice purchases it. 
B)  The home theater system remains subject to the security interest of Fourth National Bank because Alice had actual knowledge of the security interest. 
C)  The home theater system is not subject to a security interest once Alice purchases it so long as the remaining inventory of Blastaphonic is adequate to secure the amount of the indebtedness. 
D)  The home theater system remains subject to the security interest of Fourth National Bank,and this would be true even if Alice was not aware of Fourth National Bank's security interest.

Question 6

A security agreement provides that the agreement and collateral covers the current loan but also any future loans from this creditor to this debtor.This provision covers:

Accepted Answer

A)  after-acquired property 
B)  proceeds 
C)  future advances 
D)  consumer goods 
E)  floating liens 
A)  after-acquired property 
B)  proceeds 
C)  future advances 
D)  consumer goods 
E)  floating liens

Question 7

Which of the following is not generally true about artisan's and mechanic's liens?

Accepted Answer

A)  They apply where one provides materials or services with respect to goods. 
B)  They require that the labor or materials have been provided in the ordinary course of business. 
C)  There must have been authorization from the owner of the goods for the work done on them. 
D)  The artisan or mechanic can hold the goods until the amount owed is paid,but cannot sell the goods. 
E)  Artisan's and mechanic's liens are super-priority liens given priority over any existing liens on the goods. 
A)  They apply where one provides materials or services with respect to goods. 
B)  They require that the labor or materials have been provided in the ordinary course of business. 
C)  There must have been authorization from the owner of the goods for the work done on them. 
D)  The artisan or mechanic can hold the goods until the amount owed is paid,but cannot sell the goods. 
E)  Artisan's and mechanic's liens are super-priority liens given priority over any existing liens on the goods.

Question 8

Robert borrows $500 from a pawnshop,leaving his class ring as collateral.Later,Robert borrows $200 from the bank.Robert signs a financing statement giving the bank a security interest in this ring.If Robert defaults on both loans,who has superior rights to the ring?

Accepted Answer

A)  The pawnshop has superior rights,because it was the first security agreement. 
B)  The pawnshop has superior rights,because it was the first to perfect. 
C)  The pawnshop has superior rights,because the bank's interest is not perfected. 
D)  The bank has superior rights,because the pawnshop's security agreement is not in writing. 
E)  The bank has superior rights,because the pawnshop's interest is not perfected. 
A)  The pawnshop has superior rights,because it was the first security agreement. 
B)  The pawnshop has superior rights,because it was the first to perfect. 
C)  The pawnshop has superior rights,because the bank's interest is not perfected. 
D)  The bank has superior rights,because the pawnshop's security agreement is not in writing. 
E)  The bank has superior rights,because the pawnshop's interest is not perfected.

Question 9

If the proceeds from the disposition of the debtor's collateral are insufficient to satisfy the debt to the secured party,the debtor is personally liable to the secured party for the deficiency.

Accepted Answer

A) True 
 B)False

Question 10

Checks,notes,stocks,and bonds can all be subject to a security interest.

Accepted Answer

A) True 
 B)False

Question 11

A termination statement must be filed within 20 days of receipt of a debtor's written demand or within 1 month of the debt being paid,whichever comes first.

Accepted Answer

A) True 
 B)False

Question 12

In order for a security interest to give the secured party protection against the claims of other creditors of the debtor,the security interest must:

Accepted Answer

A)  terminate the debtor's interest 
B)  attach to the subject matter 
C)  become perfected 
D)  entitle the creditor to possession 
A)  terminate the debtor's interest 
B)  attach to the subject matter 
C)  become perfected 
D)  entitle the creditor to possession

Question 13

A type of security interest that does not attach to a single piece of property but also covers after-acquired property and future advances is known as a:

Accepted Answer

A)  temporary lien 
B)  fixed lien 
C)  transitory lien 
D)  floating lien 
A)  temporary lien 
B)  fixed lien 
C)  transitory lien 
D)  floating lien

Question 14

Article 9 of the UCC does not cover a security interest in the following:

Accepted Answer

A)  land 
B)  inventory 
C)  equipment 
D)  patents and copyrights 
A)  land 
B)  inventory 
C)  equipment 
D)  patents and copyrights

Question 15

After-acquired property is property that the debtor acquires after the security agreement is executed.

Accepted Answer

A) True 
 B)False

Question 16

Article 9 of the UCC applies to transactions involving real estate mortgages and landlord liens.

Accepted Answer

A) True 
 B)False

Question 17

A secured creditor may not relinquish his or her security interest in the debtor's collateral.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following apply to filing of a financing statement?

Accepted Answer

A)  The public may review financing statements. 
B)  The majority of states require financing statements pertaining to farm equipment,farm products and the like be filed with the county clerk. 
C)  A continuation statement may be filed up to six months before the expiration of the financing statement's five year term. 
D)  All of the above apply. 
A)  The public may review financing statements. 
B)  The majority of states require financing statements pertaining to farm equipment,farm products and the like be filed with the county clerk. 
C)  A continuation statement may be filed up to six months before the expiration of the financing statement's five year term. 
D)  All of the above apply.

Question 19

Generally,if two creditors have perfected security interests in the same collateral,only one of which is a purchase money security interest,which has the superior right (priority),assuming all notice is properly given within the appropriate time periods?

Accepted Answer

A)  the first to perfect 
B)  the first to attach 
C)  the purchase money security interest 
D)  they have equal priority 
A)  the first to perfect 
B)  the first to attach 
C)  the purchase money security interest 
D)  they have equal priority

Question 20

A security interest in a piece of equipment owned by a business would most often be perfected:

Accepted Answer

A)  by filing 
B)  by possession 
C)  by an agreement to that effect between debtor and creditor 
D)  automatically 
A)  by filing 
B)  by possession 
C)  by an agreement to that effect between debtor and creditor 
D)  automatically

Exam 27: Secured Transactions and Electronic Filing

A security interest can be perfected merely by possession of the collateral by the secured party.

Article 9 of the UCC governs secured transactions in personal property.

Alice buys a home theater system from Blastaphonic Audio and Video,paying cash.Alice was aware that Fourth National Bank had a perfected security interest in all the inventory of Blastaphonic.Which of the following statements is true?

A security agreement provides that the agreement and collateral covers the current loan but also any future loans from this creditor to this debtor.This provision covers:

Which of the following is not generally true about artisan's and mechanic's liens?

Robert borrows $500 from a pawnshop,leaving his class ring as collateral.Later,Robert borrows $200 from the bank.Robert signs a financing statement giving the bank a security interest in this ring.If Robert defaults on both loans,who has superior rights to the ring?

If the proceeds from the disposition of the debtor's collateral are insufficient to satisfy the debt to the secured party,the debtor is personally liable to the secured party for the deficiency.

Checks,notes,stocks,and bonds can all be subject to a security interest.

A termination statement must be filed within 20 days of receipt of a debtor's written demand or within 1 month of the debt being paid,whichever comes first.

In order for a security interest to give the secured party protection against the claims of other creditors of the debtor,the security interest must:

A type of security interest that does not attach to a single piece of property but also covers after-acquired property and future advances is known as a:

Article 9 of the UCC does not cover a security interest in the following:

After-acquired property is property that the debtor acquires after the security agreement is executed.

Article 9 of the UCC applies to transactions involving real estate mortgages and landlord liens.

A secured creditor may not relinquish his or her security interest in the debtor's collateral.

Which of the following apply to filing of a financing statement?

Generally,if two creditors have perfected security interests in the same collateral,only one of which is a purchase money security interest,which has the superior right (priority),assuming all notice is properly given within the appropriate time periods?

A security interest in a piece of equipment owned by a business would most often be perfected:

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