Suppose that $1 billion of pass-throughs is used to create a CMO structure with a PAC bond
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Answer the below questions.
(a) Will the PAC I or PAC II have the smaller average life variability? Why?
(b) Will the support bond without a schedule or the PAC II have the greater average life variability? Why? Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
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