Final answer:
The proposal for a $125,000 guaranteed OL is likely authorized since the collateral value is significantly higher than the loan amount, despite a $40,000 prior lien on a tractor.
Step-by-step explanation:
The student is asking whether it is authorized for a lender to propose a $125,000 guaranteed operating loan (OL) to refinance operating debt carried over from previous years, with the security being a lien on equipment valued at $220,000, which includes a tractor valued at $65,000 that already has a $40,000 prior lien on it. The answer to this question may depend on various factors such as the lender's policies, the degree of risk they are willing to accept, and the laws and regulations pertaining to secured transactions in the jurisdiction where the transaction is taking place. However, given the information provided, the proposal could be authorized, since the total value of the equipment is much higher than the loan amount (even when considering the prior lien), suggesting sufficient collateral coverage. Therefore, the answer is A. True.