AFSB 151 Practice Exam Questions and
Answers 100% Solved | Rated A+
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? - ✔✔Statutes of frauds
Following the Civil War, the growing number and complexity of
financial/commercial relationships led to the need for - ✔✔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. - ✔✔Principal--Raymone Construction; obligee--Village of
Malcom; Surety--SureRite Insurance
The two basic types of bonds that are written today are - ✔✔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? - ✔✔A power of attorney
1
©JOSHCLAY 2024/2025. YEAR PUBLISHED 2024.
,When evaluating a surety claim, claims representatives are often assisted
by outside legal counsel. What other professionals assist claims
representatives? - ✔✔Engineers
Suretyship and banking are alike in that - ✔✔Neither expects to suffer a
loss
Suretyship and insurance are alike in that - ✔✔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 - ✔✔Principal
Because most bonds are "joint and several liability" documents, the obligee
can recover losses from - ✔✔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 -
✔✔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? - ✔✔An
irrevocable standby letter of credit
2
©JOSHCLAY 2024/2025. YEAR PUBLISHED 2024.
,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 - ✔✔Treaty reinsurance
Which of these statements regarding the principal allocation methods for
reinsurance of surety bonds is accurate? - ✔✔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 -
✔✔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? - ✔✔Corporate suretyship
The establishment of the formal contract between the surety, principal, and
obligee that is offered to the principal is called - ✔✔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 -
✔✔Suretyship guarantees performance as well as monetary obligations.
3
©JOSHCLAY 2024/2025. YEAR PUBLISHED 2024.
, Except in the case of a forfeiture bond, if the principal defaults, the surety
will pay - ✔✔Up to the bond penalty, but no more than the obligee's actual
loss amount.
In an unlimited cosurety arrangement, the obligee can collect - ✔✔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 - ✔✔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 - ✔✔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 - ✔✔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. - ✔✔B. Forfeiture bonds.
4
©JOSHCLAY 2024/2025. YEAR PUBLISHED 2024.
Answers 100% Solved | Rated A+
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? - ✔✔Statutes of frauds
Following the Civil War, the growing number and complexity of
financial/commercial relationships led to the need for - ✔✔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. - ✔✔Principal--Raymone Construction; obligee--Village of
Malcom; Surety--SureRite Insurance
The two basic types of bonds that are written today are - ✔✔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? - ✔✔A power of attorney
1
©JOSHCLAY 2024/2025. YEAR PUBLISHED 2024.
,When evaluating a surety claim, claims representatives are often assisted
by outside legal counsel. What other professionals assist claims
representatives? - ✔✔Engineers
Suretyship and banking are alike in that - ✔✔Neither expects to suffer a
loss
Suretyship and insurance are alike in that - ✔✔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 - ✔✔Principal
Because most bonds are "joint and several liability" documents, the obligee
can recover losses from - ✔✔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 -
✔✔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? - ✔✔An
irrevocable standby letter of credit
2
©JOSHCLAY 2024/2025. YEAR PUBLISHED 2024.
,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 - ✔✔Treaty reinsurance
Which of these statements regarding the principal allocation methods for
reinsurance of surety bonds is accurate? - ✔✔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 -
✔✔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? - ✔✔Corporate suretyship
The establishment of the formal contract between the surety, principal, and
obligee that is offered to the principal is called - ✔✔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 -
✔✔Suretyship guarantees performance as well as monetary obligations.
3
©JOSHCLAY 2024/2025. YEAR PUBLISHED 2024.
, Except in the case of a forfeiture bond, if the principal defaults, the surety
will pay - ✔✔Up to the bond penalty, but no more than the obligee's actual
loss amount.
In an unlimited cosurety arrangement, the obligee can collect - ✔✔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 - ✔✔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 - ✔✔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 - ✔✔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. - ✔✔B. Forfeiture bonds.
4
©JOSHCLAY 2024/2025. YEAR PUBLISHED 2024.
