SIE practice questionmediumPrepayment risk
An investor in a pass-through Ginnie Mae security must consider:
- ACurrency risk
- BPrepayment risk✓ Correct answer
- CBusiness risk
- DMarket risk
Explanation
Why B — Prepayment risk
Ginnie Mae securities are backed by mortgages and subject to prepayment when homeowners refinance or pay off loans early. The other risks are less relevant.
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