Investors in mortgage-backed pass-through securities are exposed to a variety of risks.Compared to other fixed-income securities,the most unique of these risks is

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Prepayment risk is the most unique risk associated with mortgage-backed pass-through securities. This is because homeowners have the option to pay off their mortgage early, which affects the cash flows to investors. This risk is not present in other fixed-income securities. Default risk, credit risk, and interest rate risk are present in other fixed-income securities as well.

Investors in Mortgage-Backed Pass-Through Securities Are Exposed to a Variety