26-83 Why Are the Class C Bonds Highly Attractive to Insurance

question 47

Multiple Choice

26-83 Why are the class C bonds highly attractive to insurance companies and pension funds?

• A)Because of their ability to offer perfect prepayment protection.
• B)Because of the shortest average life with a minimum of prepayment protection.
• C)Because of their long expected duration.
• D)Because they are basically zero coupon bonds and hence carry a minimum amount of risk.
• E)Answers A and D only.

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Definitions:

Fit

The degree to which a model, test, or value accurately reflects the expected outcomes or observations.

Homoscedasticity

A condition in regression analysis where the variance of the residuals, or errors, is constant across all levels of the independent variable.

Regression Line

A line of best fit through a dataset in linear regression analysis, showing the relationship between the independent and dependent variables.

Independent Variable

An independent variable is a variable that is manipulated to determine its effects on another variable.