Shares in the Pools of Securitized Mortgages Proved to Be

question 119

True/False

Shares in the pools of securitized mortgages proved to be very safe investments, since large numbers of defaults on mortgages did not occur at the same time.

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Definitions:

Present Value

The valuation of an expected income stream determined by discounting the future income to the present using a discount rate.

Income Stream

A regular flow of money from an investment, property, or other financial assets.

Real Interest Rate

The interest rate adjusted for inflation, reflecting the real cost of borrowing or the real yield on savings.

Perfect Substitute

Two or more goods that can be used interchangeably with no loss of utility by the consumer.