For a Pool of Mortgages (With No Defaults),which of the Following

question 12

Multiple Choice

For a pool of mortgages (with no defaults) ,which of the following is false?

• A) the total amount of principal (both scheduled and prepayments)that will be paid from the pool will depend upon changes in the interest rates
• B) changes in the interest rate may cause the principal payments to be delayed or accelerated
• C) the interest payments in any one month will depend upon the amount of principal outstanding at the beginning of the month
• D) changes in the market rate of interest will affect the timing of prepayments

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Definitions:

Fixed Overhead

Regular, ongoing costs that are not affected by the level of production or sales, such as rent, salaries, and insurance.

Direct Materials

Raw materials directly used in the manufacturing of a product, which are easily traceable to the finished product.

Incremental Profit

The additional profit that is generated by undertaking a particular action, such as producing an additional unit of product.

Organic Milk

Milk produced by livestock that has been fed organic feed, without the use of antibiotics or growth hormones, and typically adheres to specific standards for organic farming.