What to know
Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.
Fixed Income
19. Mortgage-Backed Security Instrument and Market Features practice questions
19. Mortgage-Backed Security Instrument and Market Features is part of CFA Level I Fixed Income. Fixed Income questions focus on bond cash flows, yield measures, duration, convexity, credit risk, securitization, and curve interpretation. Use this page to review the controlling ideas, then work through 6 questions with answer explanations and common traps.
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Review signal
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Fixed Income
19. Mortgage-Backed Security Instrument and Market Features
When mortgage rates decline sharply, investors in residential mortgage pass-through securities are most likely exposed to increased:
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19. Mortgage-Backed Security Instrument and Market Features
Contraction risk in an RMBS is the risk that principal is repaid:
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19. Mortgage-Backed Security Instrument and Market Features
Compared with RMBS, CMBS loans most likely have greater contractual protection against prepayment through:
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19. Mortgage-Backed Security Instrument and Market Features
For a mortgage pass-through security, unscheduled principal prepayments most likely cause investors to receive principal:
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19. Mortgage-Backed Security Instrument and Market Features
In a sequential-pay CMO, principal payments are generally distributed first to the:
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19. Mortgage-Backed Security Instrument and Market Features
A PAC tranche in a CMO has a support tranche. If prepayments are within the planned range, the PAC tranche most likely has:
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