Question
Economists forecast that market yields are expected to fall as inflation expectations decline. If Treasury yields decline, what would happen to MBS pass-through securities? Group
Economists forecast that market yields are expected to fall as inflation expectations decline.
If Treasury yields decline, what would happen to MBS pass-through securities?
Group of answer choices
MBS prepayment speed would
[ Choose ] increase contraction risk price depreciation decrease price appreciation extension risk not enough information to answer
MBS duration would
[ Choose ] increase contraction risk price depreciation decrease price appreciation extension risk not enough information to answer
Price [_____] would be limited due to negative convexity.
[ Choose ] increase contraction risk price depreciation decrease price appreciation extension risk not enough information to answer
We call this [_____] risk.
[ Choose ] increase contraction risk price depreciation decrease price appreciation extension risk not enough information to answer
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