Examining the greatest average life variability

Assignment Help Management Theories

Reference no: EM131779393

Question: Suppose that $1 billion of pass-through is used to create a CMO structure with a PAC bond with a par value of $700 million and a support bond with a par value of $300 million.

a. Which of the following will have the greatest average life variability:

(i) the collateral,

(ii) the PAC bond, or

(iii) the support bond? Why?

b. Which of the following will have the least average life variability:

(i) the collateral,

(ii) the PAC bond, or

(iii) the support bond? Why?

Reference no: EM131779393

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