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105.1. The current term structure is flat with a yield of 4.0%. Assuming 100%, the price of $500 million pass-through mortgage-backed security (MBS) is $584.2
105.1. The current term structure is flat with a yield of 4.0%. Assuming 100%, the price of $500 million pass-through mortgage-backed security (MBS) is $584.2 million. Assuming a 4.5% yield and 50% PSA, the value of the MBS drops to $573.5 million, assuming a 3.5% yield and 150% PSA, the value of the MBS increases to $591.9 million. What are, respectively, the approximate effective duration and effective convexity of the MBS
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