A description of the new cmo tranche and how it may or may

Reference no: EM13387154

As a financial adviser to individual investors, your boss has asked you to write a memo to him so that he can recommend a mortgage-backed bond to a client. The client has a particular corporate bond in mind, but your boss thinks that a pass-through mortgage-backed security would provide a better yield at the same risk level and maturity. The bond that the client is considering is a 7-year, AA-rated bond with a 6.75% coupon. When it matures, the proceeds will be used for and are matched exactly with the cost of his daughter's college education, which will be paid in one lump sum. The bond your boss favors is a pass-through MBS (also 7-year with an AA rating), featuring a 7.15% coupon. Your economic research department just released a research report that predicts that interest rates are going to decline over the next several years to historical lows.

Write a memo to your boss of at least 300 words that provides the following:

Your recommendation

At least 3 reasons you considered to develop your recommendation

Shortly after you were given this task, you became aware of a new CMO issue that has an AA-rated, 7-year Class A VADM tranche, with a 7.00% coupon that uses a Z bond to protect against prepayment and extension risk. Write a second memo to your boss of at least 300 words that offers the following:

What the acronym VADM means in the context of MBS

A description of the new CMO tranche and how it may or may not be a better choice for the client than the corporate bond and the MBS that your boss initially recommended

Reference no: EM13387154

Questions Cloud

Illustrate out the term capital structure why should health : 1. what is capital structure? why should health care organizations care about it?2. what is equity

Discuss the proposition that differences in the performance : industry analysis please respond to the followingdiscuss the proposition that differences in the performance of various

Working capital techniques focus specifically on what : 1. working capital techniques focus specifically on what aspects of an organizations finances?2. what

You want to make sure that the grading form reflects what : you are the newly appointed department manager. your department has not been performing well and you have been

A description of the new cmo tranche and how it may or may : as a financial adviser to individual investors your boss has asked you to write a memo to him so that he can recommend

For a labor-intensive manufacturing operation which would : 1. unit-based product costing uses which procedure?all overhead costs are expensed as incurred.overhead costs are

Compute the quantity and price variances for each budget : madhatter manufactures baseball capsscenariomadhatter manufactures baseball caps. the accounting faculty of psu order

An automobile gasoine tanks holds 42 kg of gasoline when : an automobile gasoine tanks holds 42 kg of gasoline. when the gasoline burns 147 kg of oxygen are consumed and carbon

A 486 ml sample of water was cooled from 500acircdegc to : a 486 ml sample of water was cooled from 50.0acircdegc to 10.0acircdegc. assuming a specific heat of 4.184 jk g and a

User Account

All Pages