The Clarks borrowing [tex]$175,000 to purchase a townhouse is an example of a mortgage, where the townhouse serves as collateral for the loan.
A mortgage is the correct option as it is a loan secured by real estate, in this case, a townhouse. It serves as collateral for the borrowed amount of $[/tex]175,000.
Collateral, in this context, refers to an asset that the borrower offers to the lender as security for the loan. In the case of the Clarks, the townhouse they purchased acts as collateral.
It is important to differentiate between types of credit such as mortgages, lines of credit, and other forms of loans based on factors like collateral and repayment terms.
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