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

question 29

Multiple Choice

If the yield on mortgage-backed securities was abnormally high 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.
• E) None of the options are correct.

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Definitions:

Young Adulthood

A life stage marked by the transition from adolescence to adulthood, typically involving increased independence, identity exploration, and responsibility.

Temperament

an individual's innate predisposition to react to the environment in certain ways, which forms the basis of later personality.

Unassertive

Characterized by a lack of confidence and decisiveness in expressing one’s own desires, opinions, and needs.

Timid

Describes someone who is showing a lack of courage or confidence, easily frightened.