10-29.Investors are attracted to pass-through securities because:

Question

Quizplus · Accepted Answer

Investors are attracted to pass-through securities due to their relatively high yield and liquidity (a) and the fact that they are relatively risk-free (b) because they are backed by a pool of assets. The timing of cash flows is uncertain, as it depends on factors such as prepayment rates and defaults, but the certainty of receiving cash flows over time is a key feature of pass-through securities. Consequently, the best option is D, which includes both reasons (a) and (b). Option E, none of the above, is incorrect because (a) and (b) accurately describe why investors are attracted to pass-through securities.

10-29.Investors Are Attracted to Pass-Through Securities Because