Suppose that $1 billion of pass-throughs is used to create a CMO structure with a PAC bond

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Suppose that $1 billion of pass-throughs 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?

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Bond Markets Analysis And Strategies

ISBN: 9780132743549

8th Edition

Authors: Frank J Fabozzi

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Question Posted: Jul 28, 2024 06:00 AM

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Suppose that $1 billion of pass-throughs is used to create a CMO structure with a PAC bond

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Bond Markets Analysis And Strategies

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