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

---

Definitions:

Volatility

A statistical measure of the dispersion of returns for a given security or market index.

Delta

A measure in options trading that indicates how the price of an option is expected to change relative to a one-unit change in the price of the underlying asset.

Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a fixed period of time.

Binomial OPM

A mathematical model used to price options, considering multiple potential outcomes and the time value of money.