Tom, Lucinda, and Hye Are Friends of Ali and Make

question 4

Multiple Choice

Tom, Lucinda, and Hye are friends of Ali and make various loans to him so that he can run his falafel- making business. The business requires cash as well as equipment to run. Tom has loaned Ali a stove worth $3000 which, under the terms of the loan agreement, Ali has pledged to return to Tom whenever Tom requests. Lucinda has loaned Ali $3000 in cash, and Hye has given Ali 100 kilograms of sesame seeds worth $1000. Ali's obligations to Lucinda and Hye is simply to repay them when he can. In the event of Ali's bankruptcy, which of the following statements is TRUE?

• A) Tom is considered a secured creditor, but Lucinda and Hye are not.
• B) Tom is considered an unsecured creditor, but Lucinda or Hye are not.
• C) The claims of Lucinda and Hye have priority over Tom's.
• D) Tom is automatically considered an unsecured creditor, but so are Lucinda and Hye.
• E) Tom is a preferred unsecured creditor compared to Lucinda and Hye because he advanced credit first.

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Definitions:

Differential Stress

Stress applied to a body in varying magnitudes in different directions, often leading to deformation.

Convergent Stress

A tectonic plate stress that occurs when two plates move toward each other, potentially causing mountains or volcanoes.

Tensional Stress

Stress that occurs when forces act in opposite directions to stretch an object or material, common in geology and materials science.

Alternating Pressure

A method often used in medical beds and surfaces to prevent bedsores, where the pressure is periodically distributed and then relieved.