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True/False. A pass-through MBS pool has a WAC of 5% when issued. When interest rates fall to 4%, borrowers have a financial incentive to prepay,
True/False. A pass-through MBS pool has a WAC of 5% when issued. When interest rates fall to 4%, borrowers have a financial incentive to prepay, and the observed prepayment speed increases from 10 to 20%. If rates return to 5%, and then subsequently drop to 4% we would expect a smaller increase in prepayment speed relative to before.
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