Detailed Answer
(c) The arrangement of having collateral transferred to
a secured party is known as a pledge. Answer (a) is incorrect
because a debtor may grant a security interest in certain assets to
a lender to serve as collateral with recourse. Answer (b) is incorrect
because a debtor may grant a security interest in certain assets
to a lender to serve as collateral without recourse. Answer
(d) is incorrect because secured parties are sometimes permitted
to sell collateral held under a pledge.
(c) Financial assets subject to prepayment should be
measured like investments in debt securities classified as
available-for-sale or trading.