Which One of the Following Will Maximize the Value of an IO

question 44

Multiple Choice

Which one of the following will maximize the value of an IO strip?

• A)prepaying all mortgages in the underlying mortgage pool
• B)minimizing the duration of the underlying mortgage pool
• C)maximizing the value of the PO strip
• D)amortizing the bonds in the underlying pool faster than anticipated
• E)creating conditions where no prepayments occur in the underlying mortgage pool

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Definitions:

Performance

Execution or completion of duties or tasks as required or agreed upon in a contract.

Material Breach

A significant failure to perform a part of a contract that permits the other party to either demand performance or terminate the agreement.

Buyer's Obligations

The duties and responsibilities a buyer assumes in a transaction, such as paying the purchase price and complying with the terms of the agreement.

Contract

An agreement between two or more parties creating enforceable obligations.