I don't quite understand the relation between interest rate and mortgage. Can someone answer the following example?
"When interest rates fell, the homeowner tends to repay at lower rates. This left the mortgage bondholder holding cash."
The book said this was no problem if the investor could reinvest in at the same rate interest as the original loan, or at higher rate. But if interest rates had fallen the investor lost out. Why is this???
*I thought interest rate just affect the amount of interest that return to the borrower, so at worst will be 0% that is no interest but still can get back the capital, how will he lost out?
Thanks.1 個解答其他 - 商業及金融9 年前
４：王蒙：說客盈門1 個解答詩詞1 十年前