Which one of the following is the risk associated with receiving a mortgage bond's principal payments sooner than anticipated?

Question

Quizplus · Accepted Answer

Prepayment risk refers to the risk of receiving principal payments sooner than expected due to early repayment or refinancing of the mortgage loans underlying the bond. This can lead to a reduction in the expected yield on the bond, as investors are forced to reinvest their funds at lower interest rates.

Which One of the Following Is the Risk Associated with Receiving