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Which risk associated with investing in mortgages is that

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Problem 1: The residential mortgage type that requires only interest payments for a three-to five-year period and then payment of the full amount of the principal at the end of period is called ___________________________.

A. Build-up mortgage
B. End-focused mortgage
C. Single payment mortgage
D. Balloon payment mortgage

Problem 2: A risk associated with investing in mortgages is that

A.The borrower will make a late payment or will default (credit risk)
B.The value of the mortgage will increase when interest rates rise (interest rate risk)
C.The risk that the borrower will prepay the mortgage when interest rates fall (prepayment risk)
D.The risk that the borrower will prepay the mortgage when interest rates rise (prepayment risk)

Problem 3: The pooling and repackaging of loans into securities is called __________________________.

A. Grouping
B. Rebranding
C. Securitization
D. Repicking

Reference no: EM132976955

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