If a Mortgage Borrower Makes Prepayments Without Penalty to Take

question 18

Multiple Choice

If a mortgage borrower makes prepayments without penalty to take advantage of falling interest rates, the lender will most likely experience:

• A) extension risk.
• B) contraction risk.
• C) yield maintenance.

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Definitions:

Personal Values

The principles and beliefs that an individual holds as important and guiding their behavior.

Ethical Problem

A situation or issue that requires an individual or organization to choose between alternatives that must be evaluated as right or wrong.

Public Policy

Principles and guidelines that governments follow in their management and administration of public affairs.

Normative Ethics

The study of ethical action and the determination of what is morally right and wrong, obligatory, permissible, or desirable.