Which of the Following Statements Concerning Mortgage Backed Securities Are

question 85

Multiple Choice

Which of the following statements concerning mortgage backed securities are correct?
I. They are secured by a pool of residential mortgages.
II. A portion of the income stream is a non-taxable return of capital.
III. They are backed by the full faith and credit of the U.S. government.
IV. Their maturity depends on prepayments of the mortgages in the pool.

• A) I and III only
• B) I and IV only
• C) II, III and IV only
• D) I, II and IV only

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Definitions:

Investing Activities

Transactions and events related to the acquisition and disposal of long-term assets and investments, reported in the cash flow statement.

Hedging

A maneuver or contract that eliminates risk from a transaction. In international trade, eliminating exchange rate risk by purchasing a forward contract for delivery of foreign exchange at a specified rate at a specified time.

Settlement Date

The day when a trade is finalized, and the buyer must pay for the securities.

Floating Exchange Rate

A currency's value is allowed to fluctuate according to the foreign exchange market without direct government control.