If Interest Rates Increase, an Investor Who Owns a Mortgage

question 24

Multiple Choice

If interest rates increase, an investor who owns a mortgage pass-through security is most likely affected by:

• A) credit risk.
• B) extension risk.
• C) contraction risk.

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Definitions:

John Von Neumann

A pioneering computer scientist, mathematician, and physicist known for his contributions to game theory, computer architecture, and quantum mechanics.

Analog Signals

Continuous signals that vary over time and can represent variations in physical phenomena such as sound, light, temperature, etc.

Java Virtual Memory

An abstraction layer over physical memory that allows Java programs to execute with the impression of having more memory space than is physically available.

JVM

The Java Virtual Machine, a platform-independent execution environment that converts Java bytecode into machine code.