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A Portfolio Manager Is Evaluating Investments in Mortgage Securities as Part

question 159

Multiple Choice

A portfolio manager is evaluating investments in mortgage securities as part of a portfolio to fund long term liabilities. If she wants to minimize prepayment risk in her portfolio she is most likely to invest in:


Definitions:

Treasury Bond

A long-term, fixed-interest government security with a maturity of more than ten years, considered a safe investment.

Bid

The price a buyer is willing to pay for a security or asset.

Ask

The lowest price a seller is willing to accept for an asset being sold on the market, opposite of the bid price.

AAA Corporate Bonds

The highest quality bonds issued by corporations with a strong ability to repay the debt, making them low-risk investments.

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