If the Yield on Mortgage-Backed Securities Was Abnormally Low Compared

question 21

Multiple Choice

If the yield on mortgage-backed securities was abnormally low compared to Treasury bonds, a hedge fund pursuing a relative value strategy would

• A) short sell the Treasury bonds and short sell the mortgage-backed securities.
• B) short sell the Treasury bonds and buy the mortgage-backed securities.
• C) buy the Treasury bonds and buy the mortgage-backed securities.
• D) buy the Treasury bonds and short sell the mortgage-backed securities.

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