If the Yield on Mortgage-Backed Securities Was Abnormally High Compared

Multiple Choice

If the yield on mortgage-backed securities was abnormally high compared to Treasury bonds,a hedge fund pursuing a relative value strategy would ______.

A) short sell the Treasury and short sell the mortgage-backed securities
B) short sell the Treasury and buy the mortgage-backed securities
C) buy the Treasury and buy the mortgage-backed securities
D) buy the Treasury and short sell the mortgage-backed securities
E) C only since short sales are prohibited