Which of the Following Statements About Mortgage-Backed Security Strips Is

Multiple Choice

Which of the following statements about mortgage-backed security strips is true?

A) both interest-only and principal-only strips are subject to pre-payment risk
B) only principal-only strips are subject to prepayment risk
C) only interest-only strips are subject to prepayment risk
D) the prepayment risk of interest-only and principal-only strips is precisely offsetting
E) none of the above