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All of the following are types of prepayment penalties EXCEPT. Defeasance Yield maintenance Default differential All...

All of the following are types of prepayment penalties EXCEPT.

  1. Defeasance
  2. Yield maintenance
  3. Default differential
  4. All of the above are types of prepayment penalties
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Answer #1

c.Default differential.

Defeasance and Yield maintenance are prepayment penalties.

Default differential is related to defaulting in payments of instalments on a loan and is not a prepayment penalty.

Prepayment penalty is charged to compensate the lender for loss of interest revenue, cost of finding a new borrower etc.

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