You Own a Mortgage-Backed Security and You Will Receive Fixed

question 49

Multiple Choice

You own a mortgage-backed security and you will receive fixed semiannual interest payments and no principle payments as long as prepayments remain within a given range. If prepayments move outside the range, you will receive prepayments. You must be holding a ______________________.

• A) class C or lower sequential pay CMO
• B) PAC CMO
• C) PO security
• D) pass-through security
• E) CDO

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Definitions:

Discrimination

Unfair or prejudicial treatment of different categories of people or things, especially on the grounds of race, age, or sex.

Profitable

A state or condition of yielding a financial profit or gain; it is often considered after all expenses have been deducted.

Opportunity Cost

The cost of foregone alternatives; the value of the best alternative that is not chosen.

Leisure

Free time when individuals are not working, which can be used for rest, recreation, or personal activities.