Roundwell Motors purchases a manufacturing plant for $15 million, pays $5 million in cash as down payment, and borrows the remaining $10 million from Home Providence Bank.To secure the loan, Roundwell gives the plant as collateral to Home Providence Bank.
-What kind of collateral arrangement is in place between Roundwell Motors and Home Providence Bank?

Question

Quizplus · Accepted Answer

A mortgage is a type of collateral arrangement where the borrower gives the lender an interest in a property as security for a loan. In this case, Roundwell Motors gave the plant as collateral to Home Providence Bank to secure the $10 million loan.

Roundwell Motors Purchases a Manufacturing Plant for $15 Million, Pays