Question: Suppose that for the first four years of a CMO
Suppose that for the first four years of a CMO, prepayments are well within the initial PAC collar. What will happen to the effective upper collar?
Answer to relevant QuestionsConsider the following CMO structure backed by 8% collateral: Tranche Par Amount (in millions) Coupon Rate (%) A $300 6.50% B $250 6.75% C $200 7.25% D $250 7.75% Suppose that a client wants a notional IO with ...Answer the below questions. (a) What is a PO security? What is an IO security? (b) How is the price of an interest-only security expected to change when interest rates change? This quotation is taken from a 1991 issue of BondWeek: First Interstate Bank of Texas will look into buying several different types of collateralized mortgage obligation tranches when it starts up its buy program sometime ...Answer the below questions. a. What is meant by an involuntary prepayment? b. Why is the distinction between a voluntary and involuntary prepayment important in non agency RMBS? Answer the below questions. a. At one time, prime and subprime RMBS were traded in separate markets. Why? b. Why after 2007 are prime and subprime RMBS treated as one asset type?
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