All else being equal, when interest rates decline: A. Investors in mortgage pass-through securities face extension risk.

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All else being equal, when interest rates decline:

A. Investors in mortgage pass-through securities face extension risk.

B. The weighted average maturity of a mortgage pass-through security lengthens.

C. The increase in the price of a mortgage pass-through security is less than the increase in the price of an otherwise identical bond with no prepayment option.

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Fixed Income Analysis

ISBN: 9781119850540

5th Edition

Authors: Barbara S. Petitt

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Question Posted: Nov 04, 2023 11:08 PM

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All else being equal, when interest rates decline: A. Investors in mortgage pass-through securities face extension risk.

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C is correct When interest rates decline the prepayment r...View the full answer

Fixed Income Analysis

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