Randall Initially Owned a Piece of Land Called Blackacre That

question 51

Multiple Choice

Randall initially owned a piece of land called Blackacre that was worth $400 000. He borrowed $200 000 from Keir and created a mortgage over Blackacre in favour of Keir. Randall then borrowed $100 000 from Ian and created a mortgage over Blackacre in favour of Ian. Randall has not repaid any part of either debt. Because of a recession, the value of Blackacre has dropped to $90

• A) Although Ian holds the equity of redemption, it probably will not help him in the long run.
• B) If Blackacre is sold for $90 000 because Randall is in default under the mortgages, Keir will receive $60 000 and Ian will receive $30 000, because Randall owes Keir twice as much as Ian.
• C) Depending upon the facts, Keir may be treated as the initial mortgagor and Ian may be treated as the subsequent mortgagor.
• D) By granting two mortgages over the same property, Randall has committed mortgage fraud.
• E) It is possible that Ian will be treated as the initial mortgagee and that Keir will be treated as the subsequent mortgagee.

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Definitions:

Efficiency Wages

Wages that are deliberately set above the market equilibrium level by employers to increase productivity and efficiency among employees.

Below-equilibrium

A situation where the quantity demanded exceeds the quantity supplied at a given price.

Principal-agent Problem

A dilemma in which one party (the agent) is expected to act in the best interest of another party (the principal) but may have the incentive to act in their own interest instead.

Shirking

The behavior of avoiding or evading work responsibilities, often in employment settings.