Answer: c) Turnover and refinancing

**Answer: C) Turnover and refinancing** A prepayment model is typically built from two main components: - **Turnover**: prepayments caused by reasons other than refinancing, such as moving homes. - **Refinancing**: prepayments driven by the incentive to replace an old mortgage with a new one at a lower rate. Together, these two components explain most mortgage prepayment behavior.

Author: Manit Arora