Banks who held mortgage-backed securities “took a bath” during the financial crisis of 2007-2009 due to:

A) rising yields in secondary markets which led to a decline in the price of mortgage-backed securities.
B) falling yields in secondary markets which led to a decline in the price of mortgage-backed securities.
C) their inability to issue new mortgages.
D) more rapid pre-payment of mortgages.

ANSWER:

A) rising yields in secondary markets which led to a decline