Why Are the Regular NHA MBS Pass-Throughs Not Very Attractive

question 83

Multiple Choice

Why are the regular NHA MBS pass-throughs not very attractive to insurance companies and pension funds seeking long-term duration assets to match their long-term duration liabilities?

• A)Because of their short expected duration.
• B)Because these bonds have the shortest average life with a maximum of prepayment protection.
• C)Because they are zero coupon bonds and hence carry maximum amount of risk.
• D)Because of their failures to offer prepayment protection.
• E)Bondholders receive the promised coupon and principal payments but are not entitled to accrued interest payments.

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Definitions:

Abnormality

A deviation from the average or norm, often used in the context of behaviors or conditions that are outside societal expectations or statistical averages.

Acceptable in a Culture

Behaviors, practices, or beliefs that are considered appropriate and conform to the norms within a specific culture.

Old Junk

Derogatory term for objects that are considered useless or of little value, often accumulated over time and cluttering space.

Psychological Approach

A perspective in psychology that emphasizes the role of mental functions in understanding human behavior.