With mortgage-backed securities, prepayment risk is generally more important than interest rate risk.

Name: With mortgage-backed securities, prepayment risk is generally more important than interest rate risk.
Brand: Quizplus
Rating: 4.8 (60 reviews)

Question

Quizplus · Accepted Answer

Prepayment risk is crucial for mortgage-backed securities because borrowers may pay off their loans early, affecting the cash flow and returns for investors. Interest rate risk is also important, but prepayment risk directly impacts the timing and amount of cash flows.

With Mortgage-Backed Securities, Prepayment Risk Is Generally More Important Than