Question: Suppose that 1 billion of pass throughs is used to create

Suppose that $1 billion of pass-throughs is used to create a CMO structure with a PAC bond with a par value of $700 million and a support bond with a par value of $300 million.
Answer the below questions.
(a) Which of the following will have the greatest average life variability: (i) the collateral, (ii) the PAC bond, or (iii) the support bond? Why?
(b) Which of the following will have the least average life variability: (i) the collateral, (ii) the PAC bond, or (iii) the support bond? Why?

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  • CreatedAugust 22, 2015
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