Question: Suppose that 8% coupon pass-throughs are stripped into two classes. Class X-1 receives 75% of the principal and 10% of the interest. Class X-2 receives

Suppose that 8% pass-throughs are stripped into two classes. Class X-1 receives 75% of the principal and 10% of the interest. Class X-2 receives 25% of the principal and 90% of the interest. Answer the below questions.
(a) What type of MBS would this be?
(b) What is the syntheticcoupon rate on Class X-1?
(c) What is the synthetic rate on Class X-2?

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a The stripped MBS described in the question is a syntheticcoupon passthrough with each class receives an unequal distribution of principal and interest More details are given below Stripped mortgageb... View full answer

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