With a higher rate of pre-payments, which of the following is true for a mortgage-backed bond: The reinvestment risk of the bond will likely decrease Nothing will change because you have already purchased the bond The average life of the bond would increase O The duration of the bond will likely decrease
With a higher rate of pre-payments, which of the following is true for a mortgage-backed bond: The reinvestment risk of the bond will likely decrease Nothing will change because you have already purchased the bond The average life of the bond would increase O The duration of the bond will likely decrease
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:With a higher rate of pre-payments, which of the following is true for a mortgage-backed bond:
O The reinvestment risk of the bond will likely decrease
O Nothing will change because you have already purchased the bond
O The average life of the bond would increase
O The duration of the bond will likely decrease
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