- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 2. Fixed-Income Cash Flows and Types
- Subject 1. Fixed-Income Cash Flow Structures
CFA Practice Question
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
Correct Answer: B
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. |