The Value of an Interest-Only (IO) Mortgage-Backed Strip Is Not

question 17

True/False

The value of an interest-only (IO) mortgage-backed strip is not sensitive to changes in current market interest rates.

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Definitions:

Economic Life

The duration during which an asset remains useful and productive for its intended purpose.

Capital Lease

A lease classified as a financial transaction where the lessee essentially buys an asset and finances it over time.

Straight-Line Method

A depreciation method that allocates an equal amount of the depreciable cost of an asset to each year of the asset's useful life.

Capital Lease

An agreement that grants the lessee the right to use an asset for a long period, typically seen as a purchase by the lessee for accounting purposes.