AFSB 151 Final Exam with all Correct & 100% Verified
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A surety bond is a written document in which one party guarantees a second party's
✔Correct 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? ✔Correct Answer-Multiline property-casualty insurers
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
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.
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.
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 ✔Correct Answer-Exoneration
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.
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 ✔Correct 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
✔Correct 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? ✔Correct Answer-Compliance-only bonds
Under a public official bond guaranteeing the honesty of a treasurer, ✔Correct 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 ✔Correct 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
✔Correct Answer-A plaintiff bond
The legally mandated hazardous waste facilities performance bond ✔Correct 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 ✔Correct 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, ✔Correct 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 ✔Correct 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
✔Correct 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?
✔Correct 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? ✔Correct 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? ✔Correct Answer-Fiduciary bonds
Producers of public official bonds serve themselves and their prospective principals by
✔Correct 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? ✔Correct Answer-
Formulating underwriting policy
In the protective phase of the bond underwriting decision, indemnity is waived only for what
type of bonds? ✔Correct 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.
✔Correct 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 ✔Correct Answer-Spousal exemption
Generally, what type of individuals cause most public official bond losses? ✔Correct Answer-
Dishonest individuals
Courts often order attachment bonds to secure property when who is within the court's
jurisdiction? ✔Correct Answer-A nonresident defendant
Sureties underwrite both attachment and replevin bonds similarly, but they usually write
replevin bonds ✔Correct Answer-More quickly and for smaller amounts.
Which of the following bonds guarantee that buyers will pay farmers or other sellers of goods?
✔Correct 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? ✔Correct 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;
Answers |Actual Complete Exam |Already Graded A+
(Just Released)
A surety bond is a written document in which one party guarantees a second party's
✔Correct 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? ✔Correct Answer-Multiline property-casualty insurers
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
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.
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.
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 ✔Correct Answer-Exoneration
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.
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 ✔Correct 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
✔Correct 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? ✔Correct Answer-Compliance-only bonds
Under a public official bond guaranteeing the honesty of a treasurer, ✔Correct 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 ✔Correct 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
✔Correct Answer-A plaintiff bond
The legally mandated hazardous waste facilities performance bond ✔Correct 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 ✔Correct 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, ✔Correct 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 ✔Correct 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
✔Correct 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?
✔Correct 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? ✔Correct 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? ✔Correct Answer-Fiduciary bonds
Producers of public official bonds serve themselves and their prospective principals by
✔Correct 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? ✔Correct Answer-
Formulating underwriting policy
In the protective phase of the bond underwriting decision, indemnity is waived only for what
type of bonds? ✔Correct 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.
✔Correct 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 ✔Correct Answer-Spousal exemption
Generally, what type of individuals cause most public official bond losses? ✔Correct Answer-
Dishonest individuals
Courts often order attachment bonds to secure property when who is within the court's
jurisdiction? ✔Correct Answer-A nonresident defendant
Sureties underwrite both attachment and replevin bonds similarly, but they usually write
replevin bonds ✔Correct Answer-More quickly and for smaller amounts.
Which of the following bonds guarantee that buyers will pay farmers or other sellers of goods?
✔Correct 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? ✔Correct 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;
