A Principal Only (PO) Mortgage-Backed Strip Is Attractive to Investors

question 62

True/False

A principal only (PO) mortgage-backed strip is attractive to investors who wish to speculate about decreasing interest rates.

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Definitions:

Taxable Income

The portion of an individual's or corporation's income that is subject to taxation by governmental authorities.

Tax-Exempt

Not subject to tax by federal or local governments, often applied to charitable organizations or certain financial earnings.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, reflecting the percentage of additional income that is paid in taxes.

Average Tax Rate

The ratio of the total amount of taxes paid to the total tax base (taxable income or spending), indicating the fraction of income or expenditure paid in taxes.