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Nominal Rates

Is prepayment risk taken into account when quoting nominal rates?

Is prepayment risk taken into account when quoting nominal rates?

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WHAT they're trying to say is that nominal rates have nothing to do with prepayment risk...

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Is this some kind of trick question?

NO EXCUSES

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1) You didn't phrase correctly, we all thought you meant nominal rate (i.e. real rate + inflation = nominal rate).

2) No it does not take prepayment into consideration. That is the whole weakness of the nominal spread--it does not remove or take any consideration of prepayment risk within the spread.

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