A PO Is a "Principal Only" MBS and an IO

question 8

Multiple Choice

A PO is a "principal only" MBS and an IO is an "interest only" MBS. As prepayments increase which of the following happens.

• A) Both the PO and IO become more valuable
• B) The PO becomes more valuable and the IO becomes less valuable
• C) The PO becomes less valuable and the IO becomes more valuable
• D) Both the PO and IO become less valuable

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Definitions:

Average Collection Period

The typical duration a business must wait to collect payments from its customers for goods or services sold on a credit basis.

Financial Data

Refers to information related to the financial performance of an entity, including income, expenses, assets, and liabilities.

Sales On Account

Transactions where goods or services are sold and payment is deferred to a future date, essentially selling on credit.

Cost Of Goods Sold

The costs directly connected with generating the goods a firm sells to its customers.