CFA Practice Question

There are 490 practice questions for this study session.

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 ______.

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.
You need to log in first to add your comment.