Which of the Below Statements Is FALSE

question 28

Multiple Choice

Which of the below statements is FALSE?

• A) A stripped mortgage-backed security is created by distributing the principal and interest from a pool of underlying mortgages on an unequal basis to two classes of securityholders.
• B) A stripped mortgage-backed security is another example of a derivative mortgage security.
• C) Stripped mortgage-backed securities cannot be used to hedge a portfolio exposed to prepayment risk.
• D) There are two types of stripped mortgage-backed securities: partially stripped and IO/PO securities.

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Definitions:

Selection Effect

A source of bias that occurs when individuals or groups are not randomly assigned to conditions in an experiment, potentially affecting the outcome.

Pruning Process

The process of synapse elimination that occurs between early childhood and the onset of puberty in mammalian brains, helping to enhance the efficiency of neuronal transmissions.

Stranger Anxiety

A form of distress that children experience when exposed to people unfamiliar to them, typically appearing around 6 months of age and peaking in infancy.

Brain Plasticity

The brain's ability to change and adapt as a result of experience by reorganizing its structure, functions, or connections.