When you use a backend that requires authentication, it is best practice to:

Rationale for Correct Answer (C):

Best practice is to avoid hardcoding sensitive credentials in Terraform configurations or storing them in version control. Instead, credentials should be managed via environment variables, CLI authentication helpers, or secret managers (e.g., Vault).

Analysis of Incorrect Options:

A. Shared server: Not secure, introduces single point of failure and risk.

B. Storing credentials in config files: A major security risk, especially if pushed to version control.

D. None of the above: Incorrect, because option C is a valid and recommended approach.

Key Concept:

Security best practices in Terraform dictate that credentials should be externalized from Terraform code.