An MBB Differs from a CMO or a Pass-Through in That

question 37

Multiple Choice

An MBB differs from a CMO or a pass-through in that
I. the MBB does not result in the removal of mortgages from the balance sheet.
II. a MBB holder has no prepayment risk.
III. cash flows on a MBB are not directly passed through from mortgages.

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

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Definitions:

Consumer Surplus

The gap between what consumers are prepared and capable of paying for a product or service and what they end up spending.

Supply Change

An alteration in the quantity of goods or services that producers are willing and able to sell in the market, due to factors like price, technology, or input costs.

Consumer Surplus

The difference between the total amount consumers are willing to pay for a good or service and the total amount they actually pay.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive, evidencing economic benefit.