If the Yield on Mortgage-Backed Securities Was Abnormally High Compared

question 81

Multiple Choice

If the yield on mortgage-backed securities was abnormally high compared to Treasury bonds,a hedge fund pursuing a relative value strategy would ______.

• A) short sell the Treasury and short sell the mortgage-backed securities
• B) short sell the Treasury and buy the mortgage-backed securities
• C) buy the Treasury and buy the mortgage-backed securities
• D) buy the Treasury and short sell the mortgage-backed securities
• E) C only since short sales are prohibited

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