The Greater the Prepayment Rate for a Mortgage Pool, The

question 55

Multiple Choice

The greater the prepayment rate for a mortgage pool, the:

• A)slower the payments to the holders of the bonds supported by the pool.
• B)greater the decline in the bond principal for bonds supported by the pool.
• C)longer the age of the mortgages held in the underlying pool.
• D)lower the PSA benchmark rate.
• E)greater the default risk.

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Definitions:

Rectus Abdominis

The rectus abdominis is a long muscle that runs vertically on each side of the anterior wall of the human abdomen, primarily responsible for flexing the lumbar spine and helping to compress abdominal contents.

Tongue

A muscular organ in the mouth of most vertebrates that manipulates food for mastication and is used in the act of swallowing.

Palate

The roof of the mouth in humans and vertebrates, separating the oral cavity from the nasal cavity and consisting of the hard and soft palate.

Pharynx

A muscular tube that connects the mouth and nasal cavity to the esophagus and larynx, part of both the digestive and respiratory systems.