AFSB 151 Practice Exam With 100%
Correct Answers 2023
Any promise to answer for another person's debts or defaults, including the promise that
a surety makes to the obligee under a bond, derives from which one of these? - Correct
Answer-Statutes of frauds
Following the Civil War, the growing number and complexity of financial/commercial
relationships led to the need for - Correct Answer-Commercial suretyship.
In accordance with a contract to build a county shed for the Village of Malcom,
Raymone Construction purchases a contract surety bond from SureRite Insurance.
Identify the principal, obligee, and surety in this suretyship. - Correct Answer-Principal--
Raymone Construction; obligee--Village of Malcom; Surety--SureRite Insurance
The two basic types of bonds that are written today are - Correct Answer-Contract
surety bonds and commercial surety bonds
Sureties use what written document to authorize a producer to act as the surety's agent
in bond production? - Correct Answer-A power of attorney
When evaluating a surety claim, claims representatives are often assisted by outside
legal counsel. What other professionals assist claims representatives? - Correct
Answer-Engineers
Suretyship and banking are alike in that - Correct Answer-Neither expects to suffer a
loss
Suretyship and insurance are alike in that - Correct Answer-Insurance commissioners
regulate both.
In the surety bond three-party relationship, the party who is primarily responsible for
fulfilling the obligation and who typically has control of the obligation is the - Correct
Answer-Principal
Because most bonds are "joint and several liability" documents, the obligee can recover
losses from - Correct Answer-The principal or the surety, or from both.
A financial guarantee differs from performance and fidelity guarantees because it
requires honesty, the ability to perform the contract, and - Correct Answer-The ability to
pay money to meet the contractual obligation.
,Instead of holding a principal's assets as security, a surety might choose to hold an
instrument issued by a commercial bank for the principal, but with the surety named as
the beneficiary. What is this instrument? - Correct Answer-An irrevocable standby letter
of credit
A type of reinsurance transaction that involves an agreement between the primary
insurer and the reinsurer specifying how to transfer risks, that defines the eligible risks
in terms of lines and classes of business, that specifies the parties' obligations, and for
which eligible risks are automatically reinsured, is - Correct Answer-Treaty reinsurance
Which of these statements regarding the principal allocation methods for reinsurance of
surety bonds is accurate? - Correct Answer-Both facultative and treaty reinsurance of
bonds can be written as pro rata or excess of loss.
A basic type of bond that involves all situations in which sureties guarantee
performance of obligations that generally do not arise from contracts is - Correct
Answer-Commercial surety bonds.
Which one of the following developed in the United States to guarantee the large
amounts of money involved in the country's industrial and commercial growth? - Correct
Answer-Corporate suretyship
The establishment of the formal contract between the surety, principal, and obligee that
is offered to the principal is called - Correct Answer-Execution of a bond
While suretyship and banking both use a prequalification process to extend credit to
their customers, suretyship is different from bank credit in that - Correct Answer-
Suretyship guarantees performance as well as monetary obligations.
Except in the case of a forfeiture bond, if the principal defaults, the surety will pay -
Correct Answer-Up to the bond penalty, but no more than the obligee's actual loss
amount.
In an unlimited cosurety arrangement, the obligee can collect - Correct Answer-The full
loss from any of the cosureties up to the penal sum of the bond.
The Miller Act was passed to require principals, in addition to furnishing a performance
bond, to furnish a separate payment bond guaranteeing payment of all bills incurred by
the contractor - Correct Answer-A. For labor and materials at the project completion for
all federal jobs.
A contract bond that guarantees the local governmental authority that a principal will
complete a development in accordance with approved proposals and at the principal's
expense is a - Correct Answer-B. Subdivision bond.
, Performance bonds guarantee that the obligee will be indemnified for any loss resulting
from the principal's failure to perform the work - Correct Answer-A. According to the
contract, plans, and specifications; at the agreed price; and within the time allowed.
In bonds under this classification, the surety pays the entire bond penalty if the principal
fails to complete the obligations. - Correct Answer-B. Forfeiture bonds. Under the
forfeiture bonds classification, the surety pays the entire bond penalty if the principal
fails to complete the obligations.
This classification of license and permit bonds poses the least risk to the surety and
guarantees that the principal will conform with laws that govern the business or activity it
conducts.
Which bond classification is described? - Correct Answer-Compliance only bonds
Which one of these accurately reflects a characteristic of license and permit bonds? -
Correct Answer-A license and permit bond frequently must be furnished to the
appropriate public entity by those who need licenses or permits.
In this public official category of bonds, sureties pay losses when subordinates in the
principal's office cause them, as well as when the principal causes them. This described
category of bonds - Correct Answer-Is officials who handle public funds, and the
principals are charged with honesty and faithful performance of duty while handling
money as required by law.
Bonds in the category of public official bonds for officials whose duties require direct
involvement with members of the public - Correct Answer-C. Pay losses when principals
commit wrongful acts such as seizing the wrong goods or making wrongful arrests.
Public official bonds are written for principals who have administrative duties but do not
handle money and who - Correct Answer-Include commissioners, assessors, judges,
coroners, town clerks, engineers, and auditors.
A bond that guarantees that, if a higher court sustains an initial judgment on appeal, the
defendant will pay the entire judgment, plus court costs and interest, is - Correct
Answer-A. A supersedeas bond.
Judicial bonds - Correct Answer-A. Are a category of court bonds that arise out of
litigation and are posted by persons seeking or appealing a remedy in court.
One type of fiduciary bond is required of an individual who has the legal responsibility
for the care of a minor or a legally incompetent person or for such a person's property.
This bond is called - Correct Answer-D. A guardians bond.
A person who commences an action against another to obtain an equitable remedy may
be required to post a bond before the court will proceed with the action. This bond is
called - Correct Answer-B. A plaintiff bond.
Correct Answers 2023
Any promise to answer for another person's debts or defaults, including the promise that
a surety makes to the obligee under a bond, derives from which one of these? - Correct
Answer-Statutes of frauds
Following the Civil War, the growing number and complexity of financial/commercial
relationships led to the need for - Correct Answer-Commercial suretyship.
In accordance with a contract to build a county shed for the Village of Malcom,
Raymone Construction purchases a contract surety bond from SureRite Insurance.
Identify the principal, obligee, and surety in this suretyship. - Correct Answer-Principal--
Raymone Construction; obligee--Village of Malcom; Surety--SureRite Insurance
The two basic types of bonds that are written today are - Correct Answer-Contract
surety bonds and commercial surety bonds
Sureties use what written document to authorize a producer to act as the surety's agent
in bond production? - Correct Answer-A power of attorney
When evaluating a surety claim, claims representatives are often assisted by outside
legal counsel. What other professionals assist claims representatives? - Correct
Answer-Engineers
Suretyship and banking are alike in that - Correct Answer-Neither expects to suffer a
loss
Suretyship and insurance are alike in that - Correct Answer-Insurance commissioners
regulate both.
In the surety bond three-party relationship, the party who is primarily responsible for
fulfilling the obligation and who typically has control of the obligation is the - Correct
Answer-Principal
Because most bonds are "joint and several liability" documents, the obligee can recover
losses from - Correct Answer-The principal or the surety, or from both.
A financial guarantee differs from performance and fidelity guarantees because it
requires honesty, the ability to perform the contract, and - Correct Answer-The ability to
pay money to meet the contractual obligation.
,Instead of holding a principal's assets as security, a surety might choose to hold an
instrument issued by a commercial bank for the principal, but with the surety named as
the beneficiary. What is this instrument? - Correct Answer-An irrevocable standby letter
of credit
A type of reinsurance transaction that involves an agreement between the primary
insurer and the reinsurer specifying how to transfer risks, that defines the eligible risks
in terms of lines and classes of business, that specifies the parties' obligations, and for
which eligible risks are automatically reinsured, is - Correct Answer-Treaty reinsurance
Which of these statements regarding the principal allocation methods for reinsurance of
surety bonds is accurate? - Correct Answer-Both facultative and treaty reinsurance of
bonds can be written as pro rata or excess of loss.
A basic type of bond that involves all situations in which sureties guarantee
performance of obligations that generally do not arise from contracts is - Correct
Answer-Commercial surety bonds.
Which one of the following developed in the United States to guarantee the large
amounts of money involved in the country's industrial and commercial growth? - Correct
Answer-Corporate suretyship
The establishment of the formal contract between the surety, principal, and obligee that
is offered to the principal is called - Correct Answer-Execution of a bond
While suretyship and banking both use a prequalification process to extend credit to
their customers, suretyship is different from bank credit in that - Correct Answer-
Suretyship guarantees performance as well as monetary obligations.
Except in the case of a forfeiture bond, if the principal defaults, the surety will pay -
Correct Answer-Up to the bond penalty, but no more than the obligee's actual loss
amount.
In an unlimited cosurety arrangement, the obligee can collect - Correct Answer-The full
loss from any of the cosureties up to the penal sum of the bond.
The Miller Act was passed to require principals, in addition to furnishing a performance
bond, to furnish a separate payment bond guaranteeing payment of all bills incurred by
the contractor - Correct Answer-A. For labor and materials at the project completion for
all federal jobs.
A contract bond that guarantees the local governmental authority that a principal will
complete a development in accordance with approved proposals and at the principal's
expense is a - Correct Answer-B. Subdivision bond.
, Performance bonds guarantee that the obligee will be indemnified for any loss resulting
from the principal's failure to perform the work - Correct Answer-A. According to the
contract, plans, and specifications; at the agreed price; and within the time allowed.
In bonds under this classification, the surety pays the entire bond penalty if the principal
fails to complete the obligations. - Correct Answer-B. Forfeiture bonds. Under the
forfeiture bonds classification, the surety pays the entire bond penalty if the principal
fails to complete the obligations.
This classification of license and permit bonds poses the least risk to the surety and
guarantees that the principal will conform with laws that govern the business or activity it
conducts.
Which bond classification is described? - Correct Answer-Compliance only bonds
Which one of these accurately reflects a characteristic of license and permit bonds? -
Correct Answer-A license and permit bond frequently must be furnished to the
appropriate public entity by those who need licenses or permits.
In this public official category of bonds, sureties pay losses when subordinates in the
principal's office cause them, as well as when the principal causes them. This described
category of bonds - Correct Answer-Is officials who handle public funds, and the
principals are charged with honesty and faithful performance of duty while handling
money as required by law.
Bonds in the category of public official bonds for officials whose duties require direct
involvement with members of the public - Correct Answer-C. Pay losses when principals
commit wrongful acts such as seizing the wrong goods or making wrongful arrests.
Public official bonds are written for principals who have administrative duties but do not
handle money and who - Correct Answer-Include commissioners, assessors, judges,
coroners, town clerks, engineers, and auditors.
A bond that guarantees that, if a higher court sustains an initial judgment on appeal, the
defendant will pay the entire judgment, plus court costs and interest, is - Correct
Answer-A. A supersedeas bond.
Judicial bonds - Correct Answer-A. Are a category of court bonds that arise out of
litigation and are posted by persons seeking or appealing a remedy in court.
One type of fiduciary bond is required of an individual who has the legal responsibility
for the care of a minor or a legally incompetent person or for such a person's property.
This bond is called - Correct Answer-D. A guardians bond.
A person who commences an action against another to obtain an equitable remedy may
be required to post a bond before the court will proceed with the action. This bond is
called - Correct Answer-B. A plaintiff bond.
