A $25,000 Face Value GNMA Pass-Through Quote Sheet Lists a Spread

question 3

Multiple Choice

A $25,000 face value GNMA pass-through quote sheet lists a spread to average life of 103,PSA of 220,and a price of 101-09. This means that
I. the pass-through yield is 103 basis points above the comparable maturity Treasury bond.
II. the pass-through is being prepaid more quickly than standard PSA.
III. the pass-through is priced at $25,272.50.

• A)I,II,and III are correct.
• B)I and II only
• C)I and III only
• D)II and III only
• E)III only

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Definitions:

Fixed Order Cost

Represents the constant expenses associated with placing an order for goods or materials, regardless of the order size.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale.

Cycle Inventory

The portion of inventory available to meet normal demand during a given period without restocking.

Increase Cost

The rise in expenses associated with the production, acquisition, or maintenance of goods and services.