1. Which of the following characteristics is/are relevant for mortgage-backed bonds (MBBs)? I. The size of the mortgage pool is less than the par value of the outstanding MBBs. II. The mortgage pool must be marked to market on a regular basis. III. The MBB investors own the mortgage pool.
2. Which of the following is NOT a favorable market risk to a fixed-rate MBS mortgage pool consisting of mortgages for office and industrial properties? (a) Sudden increase in default rate on residential mortgages (b) Decreasing market interest rates (c) Steady increase in commercial real estate prices (d) Recovery in the space market for business (e) Lower than expected inflation