BUSI 420 Read & Interact Jordan, Miller Jr., & Dolvin Chapter 21 solutions complete answers

BUSI 420 Read & Interact Jordan, Miller Jr., & Dolvin Chapter 21 solutions complete answers

 

Sequential CMOs are securities created by splitting a mortgage pool into a number of slices called:

 

A higher prepayment rate will       (increase/decrease) the value of an interest-only strip CMO and       (increase/decrease) the value of a principal-only strip CMO.

 

True or false: Mortgage prepayment is a disadvantage/risk for mortgage investors.

 

Mortgage-backed bonds are often called _____.

 

True or false: All else equal, borrowers will pay less interest on a 15-year loan as opposed to a 30-year loan.

 

A homeowner is more likely to refinance a mortgage loan if interest rates _________.

 

GNMA mortgage pools are ___________, which means GNMA guarantees timely payment of principal and interest.

 

True or false: Like GNMA, FNMA is a government agency.

 

All securities representing claims on mortgage pools are generically called _______.

 

The principal component of a monthly mortgage payment is __________ in the last month of the loan.

 

True or false: Mortgage prepayment is a disadvantage/risk for mortgage lenders.

 

Which of the following is the uncertainty faced by mortgage investors regarding early payment of mortgage principal and interest?

 

Like GNMA, FNMA operates with qualified underwriters who accumulate mortgages into _____.

 

The transformation from mortgages to mortgage-backed securities is called mortgage       .

 

The process of paying down mortgage principal over the life of the mortgage is called mortgage       .

 

Paying off all or part of outstanding mortgage principal ahead of its amortization schedule is called mortgage _____.

 

True or false: While investors in GNMA mortgage pools face limited default risk, they still face prepayment risk.

 

A(n)        (seasoned/unseasoned) mortgage is less than 30 months old, while a(n)        (seasoned/unseasoned) mortgage is over 30 months old.

 

A duration measure that accounts for how mortgage prepayments are affected by changing interest rates is referred to as ________ duration.

 

A collateralized mortgage obligation is created by splitting mortgage pool cash flows according to specific __________.

 

True or false: A higher single monthly mortality will result in shorter average mortgage life.

 

Faster prepayments will       (increase/decrease) the value of interest-only strips.

 

IN a sequential CMO, securities are created by splitting a mortgage pool into a number of slices, called       .

 

True or false: Macaulay duration is an accurate measure of interest rate risk for mortgage backed bonds.

 

Securities created by splitting mortgage pool cash flows according to specific allocation rules are called _____ mortgage obligations.

 

A security created by splitting a mortgage pool into a number of slices is a        CMO.

 

Faster prepayments will        (increase/decrease) the value of principal-only strips.

 

In a sequential CMO, holders of the ____ tranche would typically carry the most default risk.

 

True or false: PAC support bonds generally carry less risk than straight PAC bonds.

 

Sequential CMOs are securities crated by splitting a mortgage pool into a number of slices called _____.

 

The probability that a mortgage is repayed in a given month is given as its _____.

 

PAC bonds are attractive to investors who require a        (high/low) degree of cash flow certainty.