Finance
A 'yield' on a mortgage-backed security represents:
AA. The annual interest rate on the underlying loans
BB. The return to the investor based on the price paid and cash flows received from the security✓ Correct
CC. The income generated by the properties securing the mortgages
DD. The government guarantee on the security
Explanation
Yield on a mortgage-backed security is the investor's total return, factoring in both coupon payments and the price paid for the security. If the security is bought at a discount, yield exceeds the coupon rate; if bought at a premium, yield is less.
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