Which of the Following Statements Is Not True of All

question 77

Multiple Choice

Which of the following statements is not true of all pass-through securities?

• A) They may not be repaid in full for 25 to 30 years.
• B) They are viewed by the capital markets as having average maturities of much less than 30 years.
• C) Their interest and principal repayments are predictable.
• D) They pass through all payments of principal and interest from the underlying pool of mortgages to the investors.

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Definitions:

Moral Hazard

A situation in which one party engages in risky behavior or fails to act in good faith because another party bears the consequences or costs.

Taxi Driver

An individual who operates a car for hire to transport passengers as a profession.

Piece-rate Garment Worker

describes an employee in the clothing manufacturing sector who is paid based on the number of pieces or units they produce, rather than receiving an hourly wage.

Extended Warranty

An additional warranty that extends beyond the original manufacturer's warranty, typically for an extra fee.