Ethan Purchases a House for $250,000

question 82

Multiple Choice

Ethan purchases a house for $250,000.He borrows $200,000 from StarCross Bank and gives the bank a mortgage on the house for this amount.StarCross Bank fails to record the mortgage.Ethan then applies to borrow $200,000 from Pentalon Bank.Pentalon Bank reviews the real estate recordings and finds no mortgage recorded against the property,so it lends Ethan $200,000.Pentalon Bank records its mortgage.Later,Ethan defaults on both loans.In this case,which of the following would be true in case of the possible foreclosure on the collateral?

• A)StarCross Bank can foreclose because they made the first loan.
• B)Pentalon Bank can foreclose because they recorded of the mortgage.
• C)The collateral has to be returned to Ethan since there is a violation of the recording statute.
• D)None of the parties involved can claim ownership of the collateral as it passes into the public domain.

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Definitions:

Domestic Opportunity Cost

The cost of forgoing the next best alternative use of a country's own resources.

Comparative Advantage

The principle that countries or entities should produce goods and services where they have a lower opportunity cost compared to others.

Domestic Opportunity Cost

The cost of forgoing the next best alternative when choosing to produce a good or service domestically.