Priscilla collects Elvis Presley memorabilia and has always wanted a “Velvet Elvis,” a painting of The King on velvet. While looking on EBay, she found the most breathtaking Velvet Elvis she had ever seen. She rushed to Graceland Bank and obtained a loan of $500. Pursuant to the terms of the loan agreement, the bank retained a security interest in the painting. Graceland Bank did not file a financing statement.

When Priscilla returned home, she was disappointed to find that the current high bid in the auction for the Velvet Elvis she wanted was already above $500. Against her better judgment, she decided the painting was worth it, and ended up winning the auction with a bid of $650. In addition to the $650, Priscilla had to pay $50 for shipping costs, for a grand total of $700. Because her loan was only for $500, Priscilla had to dip into her personal savings to complete the purchase.

Is Graceland Bank’s security interest properly perfected?

1) No, because Graceland Bank did not file a financing statement.

2) No, because the loan did not cover the full purchase price of the Velvet Elvis.

3) No, because the loan was for a Velvet Elvis and Priscilla used a portion of it to pay for shipping costs.

4) Yes.