Prepayment Risk Is the Risk Associated with a Mortgage's Cash

question 48

Multiple Choice

Prepayment risk is the risk associated with a mortgage's cash flow due to ________. More specifically, investors are concerned that borrowers will pay off a mortgage when prevailing mortgage rates fall ________ the loan's note rate.

• A) bankruptcy; below
• B) prepayments; above
• C) prepayments; below
• D) bankruptcy; above

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