AFSB 151 Final Exam| 180 Questions with Complete
Solutions (Verified)
A surety bond is a written document in which one party guarantees a second party's -
Answer-Performance to a third party for the second party's failure to fulfill an obligation.
/.Which one of the these groups, for the most part, serves the market for fidelity and
surety bonds in the United States? - Answer-Multiline property-casualty insurers
/.Sureties use what written document to authorize a producer to act as the surety's
agent in bond production? - Answer-A power of attorney
/.While suretyship and banking both use a prequalification process to extend credit to
their customers, suretyship is different from bank credit in that - Answer-Suretyship
guarantees performance as well as monetary obligations.
/.Because most bonds are "joint and several liability" documents, the obligee can
recover losses from - 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 - Answer-The ability to pay
money to meet the contractual obligation.
/.A legal remedy that a surety can use against a defaulting bond principal, in which the
surety exercises its right to force the principal to perform by exhausting the principal's
resources instead of its own, is - Answer-Exoneration
/.In an unlimited cosurety arrangement, the obligee can collect - Answer-The full loss
from any of the cosureties up to the penal sum of the bond.
/.A bond that guarantees that faulty work will be corrected and defective materials will
be replaced for a period of one year or less and that is usually provided with a
performance bond at no additional cost is a - Answer-Maintenance bond
/.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 - Answer-Subdivision bond
/.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? - Answer-Compliance-only bonds
,/.Under a public official bond guaranteeing the honesty of a treasurer, - Answer-He or
she must account for the cash that he or she holds while in office.
/.Bond losses occur when a fiduciary and its surety are held accountable because the
fiduciary did not exercise reasonable care in notifying all heirs of an impending probate
proceeding. This fiduciary is called - Answer-An administrator
/.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 - Answer-A plaintiff bond
/.The legally mandated hazardous waste facilities performance bond - Answer-Can be
posted only for hazardous waste facilities with permits, and it requires an underwriting
review of the closure plan.
/.The principal on a hazardous waste bond - Answer-Is an owner or operator of a
hazardous waste facility and is responsible for closure and postclosure care of the
facility.
/.In the next step of the bond prequalification process, once the producer has compiled
the contractor's financial documents showing significant liquidity, - Answer-The producer
may facilitate underwriter interviews to help determine the contractor's experience in
meeting past contractual obligations.
/.A contractor's percentage-of-completion estimates - Answer-Are based on the
contractor's ability to estimate the cost to complete the project and recognize income
and profit as they accrue during the project.
/.A $5 million/$20 million contract surety credit line means that the surety is willing to -
Answer-Bond single jobs up to a contract price of $5 million when the aggregate
contract backlog does not exceed $20 million.
/.Which one of the following statements is true regarding surety producers' promotion? -
Answer-Participating in professional seminars and construction industry associations is
an excellent way to communicate to a target audience.
/.When developing one aspect of the business plan, the planning group should consider
their agency's philosophy and culture, management quality and commitment, team
motivation and dedication, resources, and the continuity of ownership and management.
Which one of the following describes this aspect of the planning process? - Answer-
Identify the agency's strengths and weaknesses
/.Which one of these categories of court bonds is written primarily on the basis of an
attorney's character and reputation for trustworthiness? - Answer-Fiduciary bonds
, /.Producers of public official bonds serve themselves and their prospective principals by
- Answer-Offering their services in September after primary elections are over and the
candidates are known.
/.Staff underwriting activities generally include which one of the following? - Answer-
Formulating underwriting policy
/.In the protective phase of the bond underwriting decision, indemnity is waived only for
what type of bonds? - Answer-The smallest and least hazardous bonds
/.When a corporation has a number of subsidiaries that will all require bonds, what type
of agreement can be used that would allow the parent to provide indemnity for its
current subsidiaries and affiliates, as well as for companies it might acquire or form in
the future. - Answer-Omnibus agreement
/.An example of a common addendum that might address a principal's concern about
the conditions of a general agreement of indemnity (GAI) is - Answer-Spousal
exemption
/.Generally, what type of individuals cause most public official bond losses? - Answer-
Dishonest individuals
/.Courts often order attachment bonds to secure property when who is within the court's
jurisdiction? - Answer-A nonresident defendant
/.Sureties underwrite both attachment and replevin bonds similarly, but they usually
write replevin bonds - Answer-More quickly and for smaller amounts.
/.Which of the following bonds guarantee that buyers will pay farmers or other sellers of
goods? - Answer-Merchandising and dealer bonds
/.Compliance bonds with third-party liability allow a direct right of action against which
party for damages a third party may suffer because of the principal's acts? - Answer-
Surety
/.Which special characteristic related to fidelity bonds most directly concerns the
following statement?
Many employers will not sign complaints or testify at criminal proceedings against their
employees. They often wish to avoid damaging publicity; accept employees' "hard luck"
stories; and wish to resolve matters quickly, especially when employees accused of
theft promise restitution or are valuable employees. - Answer-Management might be
reluctant to prosecute employee thefts.
Solutions (Verified)
A surety bond is a written document in which one party guarantees a second party's -
Answer-Performance to a third party for the second party's failure to fulfill an obligation.
/.Which one of the these groups, for the most part, serves the market for fidelity and
surety bonds in the United States? - Answer-Multiline property-casualty insurers
/.Sureties use what written document to authorize a producer to act as the surety's
agent in bond production? - Answer-A power of attorney
/.While suretyship and banking both use a prequalification process to extend credit to
their customers, suretyship is different from bank credit in that - Answer-Suretyship
guarantees performance as well as monetary obligations.
/.Because most bonds are "joint and several liability" documents, the obligee can
recover losses from - 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 - Answer-The ability to pay
money to meet the contractual obligation.
/.A legal remedy that a surety can use against a defaulting bond principal, in which the
surety exercises its right to force the principal to perform by exhausting the principal's
resources instead of its own, is - Answer-Exoneration
/.In an unlimited cosurety arrangement, the obligee can collect - Answer-The full loss
from any of the cosureties up to the penal sum of the bond.
/.A bond that guarantees that faulty work will be corrected and defective materials will
be replaced for a period of one year or less and that is usually provided with a
performance bond at no additional cost is a - Answer-Maintenance bond
/.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 - Answer-Subdivision bond
/.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? - Answer-Compliance-only bonds
,/.Under a public official bond guaranteeing the honesty of a treasurer, - Answer-He or
she must account for the cash that he or she holds while in office.
/.Bond losses occur when a fiduciary and its surety are held accountable because the
fiduciary did not exercise reasonable care in notifying all heirs of an impending probate
proceeding. This fiduciary is called - Answer-An administrator
/.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 - Answer-A plaintiff bond
/.The legally mandated hazardous waste facilities performance bond - Answer-Can be
posted only for hazardous waste facilities with permits, and it requires an underwriting
review of the closure plan.
/.The principal on a hazardous waste bond - Answer-Is an owner or operator of a
hazardous waste facility and is responsible for closure and postclosure care of the
facility.
/.In the next step of the bond prequalification process, once the producer has compiled
the contractor's financial documents showing significant liquidity, - Answer-The producer
may facilitate underwriter interviews to help determine the contractor's experience in
meeting past contractual obligations.
/.A contractor's percentage-of-completion estimates - Answer-Are based on the
contractor's ability to estimate the cost to complete the project and recognize income
and profit as they accrue during the project.
/.A $5 million/$20 million contract surety credit line means that the surety is willing to -
Answer-Bond single jobs up to a contract price of $5 million when the aggregate
contract backlog does not exceed $20 million.
/.Which one of the following statements is true regarding surety producers' promotion? -
Answer-Participating in professional seminars and construction industry associations is
an excellent way to communicate to a target audience.
/.When developing one aspect of the business plan, the planning group should consider
their agency's philosophy and culture, management quality and commitment, team
motivation and dedication, resources, and the continuity of ownership and management.
Which one of the following describes this aspect of the planning process? - Answer-
Identify the agency's strengths and weaknesses
/.Which one of these categories of court bonds is written primarily on the basis of an
attorney's character and reputation for trustworthiness? - Answer-Fiduciary bonds
, /.Producers of public official bonds serve themselves and their prospective principals by
- Answer-Offering their services in September after primary elections are over and the
candidates are known.
/.Staff underwriting activities generally include which one of the following? - Answer-
Formulating underwriting policy
/.In the protective phase of the bond underwriting decision, indemnity is waived only for
what type of bonds? - Answer-The smallest and least hazardous bonds
/.When a corporation has a number of subsidiaries that will all require bonds, what type
of agreement can be used that would allow the parent to provide indemnity for its
current subsidiaries and affiliates, as well as for companies it might acquire or form in
the future. - Answer-Omnibus agreement
/.An example of a common addendum that might address a principal's concern about
the conditions of a general agreement of indemnity (GAI) is - Answer-Spousal
exemption
/.Generally, what type of individuals cause most public official bond losses? - Answer-
Dishonest individuals
/.Courts often order attachment bonds to secure property when who is within the court's
jurisdiction? - Answer-A nonresident defendant
/.Sureties underwrite both attachment and replevin bonds similarly, but they usually
write replevin bonds - Answer-More quickly and for smaller amounts.
/.Which of the following bonds guarantee that buyers will pay farmers or other sellers of
goods? - Answer-Merchandising and dealer bonds
/.Compliance bonds with third-party liability allow a direct right of action against which
party for damages a third party may suffer because of the principal's acts? - Answer-
Surety
/.Which special characteristic related to fidelity bonds most directly concerns the
following statement?
Many employers will not sign complaints or testify at criminal proceedings against their
employees. They often wish to avoid damaging publicity; accept employees' "hard luck"
stories; and wish to resolve matters quickly, especially when employees accused of
theft promise restitution or are valuable employees. - Answer-Management might be
reluctant to prosecute employee thefts.
