Which of the Following Is an Example of a Negative

question 40

Multiple Choice

Which of the following is an example of a negative duration asset that is valuable as a portfolio-hedging device for an FI manager when included with regular bonds whose price-yield curves show the normal inverse relationship?

• A)PO strip
• B)IO strip
• C)Class B bonds
• D)Class Z bonds

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Definitions:

Second Mortgage

A loan taken out on a property that is already mortgaged, with the second loan being subordinate to the first.

Mortgage Rate

The interest rate charged by a lender for a loan used to purchase a property.

Average Cost

The total cost of production divided by the number of units produced, representing the cost per unit.

Shares

Units of ownership in a company or financial asset, giving shareholders a portion of the company's profits and voting rights.