Question 1

A property in which a security interest is taken is called ________.

Accepted Answer

A property in which a security interest is taken is called collateral.

Question 2

John buys a new car with the help of a loan.He permits the creditor to take possession of the car if he cannot repay the loan in time.Here,the car is the ________.

Accepted Answer

The car is pledged as collateral to secure the loan, meaning that if John defaults, the creditor can repossess the car to recover the amount owed. Therefore, the car is considered as collateral.

Question 3

In secured credit,the creditor cannot recover the collateral despite the debtor's defaults on the loan.

Accepted Answer

In secured credit, the creditor has the right to recover the collateral in the event of the debtor's default on the loan.

Question 4

The extension of secured credit requires a debtor's pledge of some personal property as collateral for a loan.

Accepted Answer

Secured credit requires collateral, which is typically some form of personal property pledged by the debtor as a guarantee for the loan.

Question 5

If a lender extends unsecured credit to a debtor,the creditor takes no interest in any collateral to secure the loan.

Accepted Answer

Unsecured credit means that there is no collateral securing the loan. Therefore, the creditor does not have any interest in any collateral.

Question 6

Which of the following is considered tangible personal property?

Accepted Answer

A car is a physical object that can be touched and is therefore considered tangible personal property. Mutual fund investments, trademarks, and patents are considered intangible personal property.

Question 7

________ is a situation in which a creditor agrees to extend credit only if the purchaser pledges some personal property as collateral for the loan.

Accepted Answer

Secured credit is a situation in which a creditor agrees to extend credit only if the purchaser pledges some personal property as collateral for the loan. The creditor can seize and sell the collateral to recover the amount of the loan if the borrower defaults on the loan.

Question 8

When a creditor extends credit to a debtor and takes a security interest in some personal property of the debtor,it is called a ________.

Accepted Answer

A secured transaction is a transaction in which a creditor takes a security interest in the debtor's property to secure the debt. This allows the creditor to foreclose on the property and recover the debt if the debtor fails to repay. The security interest is typically created by a security agreement and perfected by filing a financing statement in the appropriate state registry.

Question 9

A ________ has an ownership or other interest in the collateral and owes payment of a secured obligation.

Accepted Answer

A debtor has an ownership or other interest in the collateral and owes payment of a secured obligation. A creditor is the entity that provides credit or loans, a seller is the person or business that sells goods or services, and a lender is the entity that provides loans or credit.

Question 10

William buys a $500,000 house from Keith Geller through a realtor.He makes a down payment of $200,000.He borrows the rest from Smith and Sons,a lending firm,and places his new house as collateral for the loan.Who is the debtor in this case?

Accepted Answer

William is the one borrowing money and placing his new house as collateral, making him the debtor. Keith Geller is the seller, Smith and Sons is the lender, and the realtor is just facilitating the transaction.

Question 11

Article 9 of the Uniform Commercial Code governs secured transactions in personal property.

Accepted Answer

Article 9 of the Uniform Commercial Code indeed governs secured transactions in personal property.

Question 12

In a secured transaction,the debtor is the secured party.

Accepted Answer

In a secured transaction, the creditor is the secured party and the debtor provides collateral to secure the loan or obligation.

Question 13

When a buyer obtains a loan from a bank to pay a seller,the transaction is known as a(n)________.

Accepted Answer

A three-party secured transaction involves a buyer, seller, and a bank. The buyer obtains a loan from the bank to pay the seller, and the seller receives payment from the bank instead of directly from the buyer. This ensures that the bank has a security interest in the transaction and can possess the item being sold if the buyer defaults on the loan.

Question 14

Intangible personal property cannot be used as collateral for a security agreement.

Accepted Answer

Intangible personal property such as patents, trademarks, copyrights, and stocks/bonds can be used as collateral for a security agreement.

Question 15

A secured transaction is one in which the creditor and debtor carry out financial transactions in a secure medium,such as a private communication channel.

Accepted Answer

A secured transaction involves a security interest in collateral to secure the payment or performance of an obligation, not just the use of a secure communication medium.

Question 16

Which of the following transactions occurs when a seller sells goods to a buyer on credit and retains a security interest in the goods?

Accepted Answer

This is a two-party secured transaction because it involves only the seller and the buyer, where the seller retains a security interest in the goods sold on credit.

Question 17

A business purchases an airplane from an airplane manufacturer.The business obtains a loan to purchase the airplane from a bank,which obtains a security interest in the airplane.The airplane manufacturer is paid for the airplane out of the proceeds of the loan.This is a(n)________ transaction.

Accepted Answer

This is a three-party secured transaction because there are three parties involved: the business, the airplane manufacturer, and the bank. The loan obtained by the business is secured by the airplane, which gives the bank a security interest in the airplane. This means that if the business defaults on the loan, the bank can repossess and sell the airplane to recoup its losses.

Question 18

Tangible personal property includes securities,patents,trademarks,and copyrights.

Accepted Answer

Tangible personal property refers to physical objects that can be touched, such as furniture, vehicles, and electronics. Securities, patents, trademarks, and copyrights are considered intangible property.

Question 19

Which article of the Uniform Commercial Code governs secured transactions in personal property?

Accepted Answer

Article 9 of the Uniform Commercial Code governs secured transactions in personal property.

Question 20

The property in which a security interest is taken is called collateral.

Accepted Answer

The property against which a security interest is taken is referred to as collateral.

Quiz 27: Secured Transactions

A property in which a security interest is taken is called ________.

John buys a new car with the help of a loan.He permits the creditor to take possession of the car if he cannot repay the loan in time.Here,the car is the ________.

In secured credit,the creditor cannot recover the collateral despite the debtor's defaults on the loan.

The extension of secured credit requires a debtor's pledge of some personal property as collateral for a loan.

If a lender extends unsecured credit to a debtor,the creditor takes no interest in any collateral to secure the loan.

Which of the following is considered tangible personal property?

________ is a situation in which a creditor agrees to extend credit only if the purchaser pledges some personal property as collateral for the loan.

When a creditor extends credit to a debtor and takes a security interest in some personal property of the debtor,it is called a ________.

A ________ has an ownership or other interest in the collateral and owes payment of a secured obligation.

William buys a $500,000 house from Keith Geller through a realtor.He makes a down payment of $200,000.He borrows the rest from Smith and Sons,a lending firm,and places his new house as collateral for the loan.Who is the debtor in this case?

Article 9 of the Uniform Commercial Code governs secured transactions in personal property.

In a secured transaction,the debtor is the secured party.

When a buyer obtains a loan from a bank to pay a seller,the transaction is known as a(n) ________.

Intangible personal property cannot be used as collateral for a security agreement.

A secured transaction is one in which the creditor and debtor carry out financial transactions in a secure medium,such as a private communication channel.

Which of the following transactions occurs when a seller sells goods to a buyer on credit and retains a security interest in the goods?

A business purchases an airplane from an airplane manufacturer.The business obtains a loan to purchase the airplane from a bank,which obtains a security interest in the airplane.The airplane manufacturer is paid for the airplane out of the proceeds of the loan.This is a(n) ________ transaction.

Tangible personal property includes securities,patents,trademarks,and copyrights.

Which article of the Uniform Commercial Code governs secured transactions in personal property?

The property in which a security interest is taken is called collateral.