Which of the Following Statements Is True Regarding an Investment

question 88

Multiple Choice

Which of the following statements is true regarding an investment in mortgage-backed securities?

• A) There is little default risk.
• B) The stated maturity is generally 10 years.
• C) They receive a fixed payment per month.
• D) They are not subject to prepayment.

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Definitions:

Borrowers

Individuals or entities that receive funds from a lender with the agreement to repay the borrowed amount plus interest.

Lenders

Individuals or institutions that provide funds to borrowers under the condition of being repaid with interest.

Real Interest Rate

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

Actual Rate

The real, observed interest rate in the market, not adjusted for inflation.