Cash flow yield question cas, limitation, following, question

bchadwick

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)