An MBB differs from a CMO or a pass-through in that I. a MBB does not result in the removal of mortgages from the balance sheet. II. a MBB holder has no prepayment risk. III. cash flows on a MBB are not directly passed through from mortgage holders.

Select one:

a.

I only

b.

I, II, and III

c.

II and III only

d.

I and II only

e.

I and III only

A bank with short-term rate-sensitive assets funded with long-term fixed-rate liabilities could do which of the following to limit its interest rate risk? I. Buy a cap. II. Buy an interest rate swap. III. Buy a floor. IV. Sell an interest rate swap.

Select one:

a.

III only

b.

I and IV only

c.

II and III only

d.

III and IV only

e.

I and II only