| Based on the following information to answer questions from 39 to 40: A mortgage-backed security has been divided into three classes or tranches as follows: Tranche Ⅰ receives net interest and all the principal payments until it is completely paid off. Tranche Ⅱ receives its share of net interest and starts receiving all the principal repayments after Tranche Ⅰ has been completely paid off. Prior to that, it only receives interest payments. Tranche Ⅲ receives monthly net interest and starts receiving all principal repayments after Tranches Ⅰ and Ⅱ have been completely paid off. Prior to that, it only receives interest payments. |
For an investor who is interested in long-term gains, in which tranche should she invest（）
A. Tranche Ⅲ.
B. Tranche Ⅰ.
C. Tranche Ⅱ.
参考答案：A
解析：
Tranche Ⅲ has the least amount of prepayment risk; therefore, there is a greater chance that the investor will be able to hold on to the investment for a longer time horizon.