FRM II-MR EDU practice q2

anbu.edu
Finance Junkie
Posts: 205
Joined: Mon Feb 04, 2013 3:35 pm

FRM II-MR EDU practice q2

Postby anbu.edu » Sun Aug 10, 2014 6:28 am

Which of the following factors are generally considered to affect the prepayment risk for the
mortgage?
I. Changes in interest rates
II. Principal Outstanding
Select one:
a. I only
b. II only
c. Both
d. Neither

Can you please explain how principal OS affect prepayment risk

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

FRM II-MR EDU practice q2

Postby edupristine » Mon Aug 11, 2014 11:32 am

Answer is C.
If Principal amount is huge then any change in interest rate will have a more impact on PV.
Prepayment risk is related to principal outstanding.


Return to “FRM Part II”



cron

Disclaimer

Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to abuse@edupristine.com and we will rectify it.