What Is the Primary Distinction Between Mortgage-Related Securities Backed by Residential

question 25

Multiple Choice

What is the primary distinction between mortgage-related securities backed by residential mortgages and those backed by commercial mortgages?

• A)Default is the key risk with residential mortgages; prepayment is the key risk with commercial mortgages
• B)Interest rate risk is the key risk with residential mortgages; prepayment is the key risk with commercial mortgages
• C)Prepayment is the key risk with residential mortgages; default is the key risk with commercial mortgages
• D)Prepayment is the key risk with residential mortgages; interest rate risk is the key risk with commercial mortgages

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Definitions:

Rain Forests

Dense, usually tropical forests, characterized by high rainfall, rich biodiversity, and a canopy structure with multiple layers of vegetation.

Equator

An imaginary line around the middle of the Earth, equidistant from the North and South Poles, dividing the Earth into the Northern and Southern Hemispheres.

Carbon Dioxide

A colorless, odorless gas produced by burning carbon and organic compounds and by respiration. It is naturally present in the air and absorbed by plants in photosynthesis.

Climate Change

The significant and lasting changes in the statistical distribution of weather patterns over periods ranging from decades to millions of years.