Which Is True

question 19

Multiple Choice

Which is true?

• A) the value of a pass-through is the sum of the component IO and PO
• B) if interest rates rise above the coupon rate prepayment will accelerate
• C) the acceleration of prepayment will reduce the value of the PO
• D) the increase in market rates reduces the discount rate used to value the PO cash flows

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Definitions:

Debits

In accounting, entries that increase asset or expense accounts, or decrease liability, equity, or revenue accounts.

Assets

Assets are possessions or properties held by a company, anticipated to yield economic advantages in the future.

Credits

An accounting entry that increases liabilities and equity or decreases an asset or expense account in double-entry bookkeeping.

Insurance Expense

The cost incurred by a business for insurance coverage, recognized as an expense over the policy period.