A bank has purchased a significant amount of loan receivables of another bank. The loan portfolio is made up of several home mortgages, making it essentially a mortgage-backed security. The investing bank has created its cashflow forecast from the receivable but faces the risk that if interest rates decline, principal payments will be made earlier and that interest collections will not happen. What risk does the bank face?* A.)Mortgage Default Risk B.) Mortgage Prepayment Risk C.) Mortgage Settlement Risk D.) Mortgage Extension Risk

A bank has purchased a significant amount of loan receivables of another bank. The loan portfolio is made up of several home mortgages, making it essentially a mortgage-backed security. The investing bank has created its cashflow forecast from the receivable but faces the risk that if interest rates decline, principal payments will be made earlier and that interest collections will not happen. What risk does the bank face?* A.)Mortgage Default Risk B.) Mortgage Prepayment Risk C.) Mortgage Settlement Risk D.) Mortgage Extension Risk

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 1bM

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