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Suppose a PAC bond is created using prepayment speeds of 9 0 PSA and 2 4 0 PSA and the average life is 5 years.
Suppose a PAC bond is created using prepayment speeds of PSA and PSA and the average life is years. Will the average life for this PAC tranche be shorter than, longer than, or equal to years if the collateral pays at PSA over its life? Explain your answer.
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