The Jackson State Bank is worried because many of the loans it has made are home mortgages which can be paid off early by the homeowner. What type of risk would this be an example of? a. Default risk b. Inflation risk c. Liquidity risk d. Call risk e. Basis risk

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Raina Bowen

24 June, 05:39

The Jackson State Bank is worried because many of the loans it has made are home mortgages which can be paid off early by the homeowner. What type of risk would this be an example of? a. Default risk b. Inflation risk c. Liquidity risk d. Call risk e. Basis risk

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Jeffrey Montes · Answer 1

The correct answer is letter "D": Call risk.

Explanation:

The term call risk is usually related to bonds. It refers to the option bonds have to be redeemed before maturity. Bond issuers take advantage of call risks when interest rates drop in the market to redeem the bonds already issued to issue new bonds at a lower rate.