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 an agreement in which a borrower gives a lender a security interest in property, such as real estate or equipment, to secure a loan. In this case, Roundwell Motors has given the manufacturing plant as collateral to Home Providence Bank to secure the loan, which is a classic example of a mortgage.

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