标题: Why not 2013? [打印本页] 作者: grharmeyer 时间: 2011-7-11 19:30 标题: Why not 2013?
Assume that interest rates in the year 2010 decrease below historical averages. They continue their downward trend for years 2011 and 2012. In which year would a MBS be least likely to be experience high rates of prepayment?
A) 2013.
B) 2012.
C) 2010.
Your answer: A was incorrect. The correct answer was B) 2012.
In a mortgage-backed security (MBS), whether a mortgage is called depends on the path of previous interest rates. If rates have been on a downward trend, then fewer mortgages will be refinanced as the trend continues because homeowners that have wanted to refinance will have already done so. Thus fewer mortgages will be refinanced in the year 2012 than in the earlier years.作者: Swanand 时间: 2011-7-11 19:30
i guess its because you have no info on 2013 but like you said, whether theres an increase or decrease prepayments will be lower.
as i go through qbank this year i'm finding that i can spot a lot more questions that i label as the "dumb, too vague, know something like this wont be asked" type. but maybe im wrong.
