Incentive to prepay their mortgage

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Reference no: EM132042095

1. If interest rates fall, homeowners in the U.S. have an incentive to prepay their mortgage because

The mortgage can be repaid at the book value

The mortgage can be repaid at the market price

The mortgage can be repaid at a discount

2. Mortgage bankers use the TBA market to hedge the risk associated with mortgage applicants not closing on their purchase.

True

False

Reference no: EM132042095

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