Which of the Following Are Not Considered a Simplifying Assumption

Multiple Choice

Which of the following are not considered a simplifying assumption indicative of the restrictive nature of the option model approach and the option-adjusted spread?

A) The only reasons for prepayment are due to refinancing mortgages at lower rates; there is no prepayment for turnover reasons.
B) The current discount (zero-coupon) yield curve for T-bonds is flat.
C) The mortgage coupon rate is 10% on an outstanding pool of mortgages with an outstanding principal balance of $1 million.
D) Mortgage loans are fully amortized, and there is no servicing fee.
E) The interest rate movements over time change a maximum of 10% up or down each year and the time path of interest rate does not follow a binomial process.