Explanation:
The exception is D.
A corporate mortgage bond is simply a secured bond backed by a mortgage lien on property. The lien does not normally create the kind of negative convexity associated with prepayable mortgage-backed securities.
The other statements are true:
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Q-1.3. Each of the following is true about a corporate mortgage bond EXCEPT:
A
A mortgage bond grants the bondholders a first-mortgage lien on substantially all its properties
B
A lien is a legal right to sell mortgaged property to satisfy unpaid obligations to bondholders
C
As a result of a first-mortgage lien, which provides additional security for the bondholder, the issuer is able to borrow at a lower rate of interest than if the debt were unsecured.
D
In a corporate mortgage bond, the lien tends to create negative convexity at lower yields