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标题: Cash flow yield question [打印本页]

作者: mamuka12 时间: 2011-7-11 19:31 标题: Cash flow yield question

A and C sound the same (could both be the right answer).. Dumb question to just throw away?

Which of the following assumptions is least likely a limitation of the cash flow yield measure?

A) The computation includes an assumption about the default rate of the underlying loans.

B) MBS or ABSs are held until the final payout based on some prepayment assumption.

C) The credit risk associated with the underlying loans is constant over the life of the security.

Your answer: C was correct!

The cash flow yield measure does not rely on any credit risk assumption. (Study Session 15, LOS 57.a)

作者: lucasg85 时间: 2011-7-11 19:31

isn't default only one of the many factors affecting credit risk?

CP

作者: MiniMe7 时间: 2011-7-11 19:31

yes exactly. is C just right because there is an assumption made about default rates (choice A) but the assumption made is not constant (choice C)?

I didnt know cash flow yield made any assumption about defaults.

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