First Bank Loaned $400,000 to Thomas,taking a Security Interest in His

question 10

Multiple Choice

First Bank loaned $400,000 to Thomas,taking a security interest in his yacht.Thomas defaulted on the loan and First Bank repossessed the boat.First Bank sold the yacht at a public sale.The sale yielded $50,000 more than the debt.First Bank

• A)must pay Thomas the $50,000.
• B)is entitled keep the $50,000.
• C)must share the $50,000 equally with Thomas.
• D)must pay the surplus to the Secretary of State.

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Definitions:

Deposits

Money placed into a financial institution for safekeeping, which can earn interest over time.

Excess Reserves

The amount of reserve funds that a bank holds beyond what is required by regulations, which can be loaned out or invested.

Actual Reserves

The sum of money a bank holds in its vault or with the central bank, ready to satisfy withdrawal requests or comply with regulatory obligations.

Required Reserves

The minimum amount of funds that a bank must hold in reserve against deposits, as mandated by monetary authorities.