PREPAYMENT RISK
\pɹɪpˈe͡ɪmənt ɹˈɪsk], \pɹɪpˈeɪmənt ɹˈɪsk], \p_ɹ_ɪ_p_ˈeɪ_m_ə_n_t ɹ_ˈɪ_s_k]\
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The risk associated with a fall in interest rates that is incurred by the lender or investor. As interest rates fall, most borrowers will pay of their loan balances and the investors are left to reinvest them at rates lower than they would have preferred.
By Henry Campbell Black
