1. Concepts and Definitions I 1) What is meant by immunizing a bond portfolio? ii) For mortgage loans, what is prepayment risk? iii) How does a defined benefit pension plan differ from a defined contribution plan? iv) What is the advantage of a prepayment penalty mortgage from the perspective of the lender? v) What are the risks associated with the projected liabilities of a defined benefit pension plan? 2. Concepts and Definitions II: True or False? And Why? i) It is not necessary for an agency MBS to have credit enhancement True ii) In the calculation of modified duration there is no need for a prepayment model (or assumption) iii) If the funding gap of a defined benefit pension plan increases, the funding ratio will more likely decrease iv) There is no credit risk in an interest rate swap v) Immunized portfolio should not be rebalanced periodically