Question

Your broker calls to offer you the investment opportunity of a lifetime, the chance to invest in mortgage-backed securities. The broker explains that these securities are entitled to the principal and interest payments received from a pool of residential mortgages. List some of the questions you would ask your broker to assess the risk of this investment opportunity. Questions you would ask include: (Select best choice below.) A. Type of real estate (commercial properties offer less liquidity if the market turns sour, because empty homes can be rented for revenue). B. What percentage of borrowers and behind on their mortgage payments? C. Real estate location (after all, the three most important determinants of real estate price are "location, location, location"). D. Will borrowers soon be experiencing an interest rate increase because they took out a mortgage with a low initial rate that was adjustable after a period of time? E. Quality of real estate (is in a good condition, or would there need to be repairs prior to sale?) F. Creditworthiness of borrowers (how likely is it that borrowers will lose their job and be unable to make payments on a timely basis?) G. Precedence in bankruptcy (would other lenders have a senior claim to properties in bankruptcy?). H. Percentage of properties in the region that are "under water" (homeowners owe more than they borrowed) or in foreclosure. I. All of the above.

Answer 1

I. All of the above.

Step-by-step explanation:

All the given questions are valid questions to be asked to a broker engaged in investment of mortgage backed securities).

An investor in mortgage backed securities will be interested in knowing the type of real estate, percentage of borrowers , real estate location, relevant interest rates, precendence in bankruptcy etc.