Finance is a deadline-driven profession. For example, Bank A files a UCC Financing Statement on December 1, 2015 which gives the bank the first lien of the borrowers collateral ($600,000 of machinery) and is good for five years. Bank B files a UCC Financing Statement on December 1, 2016 which gives the bank a second lien on the $600,000 of machinery. Bank A files a Financing Statement Amendment (aka continuation statement) on December 2, 2020. The borrower has only two debts outstanding: a loan of $500,000 from Bank A and a loan of $500,000 from Bank B. The borrower goes bankrupt in February 2021 and sells the $600,000 of equipment to pay down the loans.

a. What are the loan losses for Bank A and Bank B, respectively? Explain your answer.

b. What should have been the penalty for the bank employee who forgot to file the continuation statement for Bank A? Explain your answer?

c. If a student in Finance 333 submits a homework after the generous grace period, what is the penalty? Do you think the penalty is too severe? Explain your answer.