12) The following feature of this commercial mortgage-backed security has most likely improved its credit rating?

1. Balloon payments.
2. Call Protection.
3. Subordination.

14) Which of the following investments is least subject to prepayment risk?

1. Residential mortgage-backed securities.
2. Auto loan receivable-backed securities.
3. Commercial mortgage-backed securities (CMBS).

19) If a mortgage pool has a CPR of 8% that means:

1. The pool is expected to experience an 8% default rate during its life.
2. Approximately 8% of the outstanding mortgage balance at the beginning of the year is expected to be prepaid by the end of the year.
3. Approximately 8% of the pools expected to be defeased by the end of the year.

20) When we think about the monthly cash flows of a mortgage pass-through security, which is true:

1. they are usually stable over time.
2. they replicate the cash flows of the underlying pool of mortgages.
3. they can change when interest rates increase or decrease.