Sarah, a Public Servant, Gave a Security Interest to Her

question 40

Multiple Choice

Sarah, a public servant, gave a security interest to her brother Peter in all her assets to secure her obligation to repay a loan from Peter. Peter filed a financing statement to register his interest. Subsequently, Joan bought some furniture from Sarah. Joan had no knowledge of Peter's security interest. Which of the following statements best describes Joan's legal position?

• A) Joan bought the furniture free of Peter's security interest because she had no notice of it.
• B) Joan's interest in the furniture is subject to Peter's security interest.
• C) Joan's bought the furniture free of Peter's security interest because Sarah is not in the business of selling furniture.
• D) Joan is obliged to give the furniture to Peter.
• E) Joan bought the furniture free of Peter's security interest because security interests of close family relatives are not enforceable against third parties.

---

Definitions:

Portfolio Hedge Ratios

Ratios used to determine the appropriate amount of hedging needed to minimize risk in an investment portfolio, often through derivatives like options or futures.

Dynamic Hedging

A strategy that involves periodically adjusting the quantities of instruments used in a portfolio to hedge against risk as market conditions change.

Out-of-the-money

A term used in options trading to describe an option that has no intrinsic value. A call option is out-of-the-money if the stock price is below the strike price, and a put option is out-of-the-money if the stock price is above the strike price.

Intrinsic Value

The intrinsic worth of an asset, determined by the underlying true value encompassing all elements of the business, covering both tangible and intangible factors.