Question

ABC has a $150,000 open line of credit with Local Bank. Alice, the president of ABC, promised Local Bank that she will be liable if ABC defaults on any of the draws it takes against its line of 7. credit. Under this agreement, Alice is a a. special guarantor b. general guarantor c. co-principal d. co-surety Chapter: 29.2B Difficulty: 2 Type: Conceptual A third party who promises a creditor to be liable for a principal's payment is either a surety or a(n) 8 a. obligee b. principal debtor c. guarantor d. obligor Chapter: 29.2B Difficulty: 1 Type: Factual oo

Answer 1

7. (b) General Guarantor.

A general guarantor is a person who takes responsibility for the financial obligation of another person. Such kinds of obligation can be taken by anyone. In the given case, Alice promised the Local Bank that he will be held liable in case ABC defaults in making the payment. Therefore, Alice is a general guarantor. Hence, the right answer is (b).

8. (c)

A surety is the guarantee of the payment of one person by another person. A surety can be an individual or an organization that takes the responsibility to make the payment in case of the debtor defaulting in making the payment. A surety is also called a guarantor. Hence, the right answer is (c).