You buy a Principal Only Strip. The price at the time of purchase reflects a 12% expected annual prepayment rate. One hour after your purchase, you learn that it is actually not prepayment but default rate, and that only 80% of the defaulted balance can be recovered. The value of your security should? Note: There is no prepayment on top of that.

1. remain the same
2. rise
3. the answer cannot be determined with the given information
4. fall