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Basic Question 11 of 18
For amortizing securities, individual borrowers have the option to pay of all or part of their loan prior to the scheduled date. This is called a ______.
B. prepayment
C. callable bond
A. sinking fund
B. prepayment
C. callable bond
User Contributed Comments 6
| User | Comment |
|---|---|
| danlan | Sinking fund is an obligation and prepayment is an option |
| surob | Good point danlan |
| jerylewis | Why not callable bond? |
| todolist | not callable bond since it refers to individual borrowers. Think about passthrough mortgages. |
| RCapistrano | Firms issues bonds -- individual borrowers (people) do not issue bonds so prepayment is the best choice. |
| slipleft | With callable, there is no option to retire a portion of the bond I hold. The question specifies this option. |
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Learning Outcome Statements
describe common cash flow structures of fixed-income instruments
CFA® 2024 Level I Curriculum, Volume 4, Module 2.