Question: Suppose that the 1 billion of collateral in Question 14
Suppose that the $1 billion of collateral in Question 14 was divided into a PAC bond with a par value of $800 million and a support bond with a par value of $200 million. Will the PAC bond in this CMO structure have more or less protection than the PAC bond in Question 14?
Answer to relevant QuestionsSuppose that $1 billion of pass-throughs is used to create a CMO structure with a PAC bond with a par value of $700 million (PAC I), a support bond with a schedule (PAC II) with a par value of $100 million, and a support ...An issuer is considering the following two CMO structures. The first structure is: Tranches A to E are a sequence of PAC I’s and F is the support bond. The second structure is: Tranches A to E are a sequence of PAC I’s, ...Explain the effect on the average lives of sequential-pay structures of including an accrual tranche in a CMO structure. Suppose that for a securitization with a shifting interest mechanism you are given the following information for some month: subordinate interest = 25% shifting interest percentage = 85% regularly scheduled principal payment ...What is the concern with the inclusion of fixed-rate mortgage loans in the collateral pool when the liabilities are floating rate?
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