Answer: Extension risk.

**Explanation:** - **Option A (Correct):** Extension risk refers to the risk that when interest rates rise, prepayments on mortgages will be lower than anticipated. Homeowners are less inclined to refinance when rates are higher, leading to a longer-than-expected maturity for mortgage-backed securities. This aligns with the scenario described in the question. - **Option B (Incorrect):** Contraction risk occurs when interest rates decline, not rise. In such cases, prepayments increase as homeowners refinance at lower rates, shortening the security's maturity. This is the opposite of the situation described. - **Option C (Incorrect):** Reinvestment risk arises when interest rates fall, forcing investors to reinvest cash flows (e.g., from prepayments) at lower rates. This is unrelated to the scenario of rising interest rates. *Fixed Income: Understanding prepayment risk and the role of time tranching in securitizations is essential for analyzing mortgage-backed securities.*

Author: LeetQuiz Editorial Team