PT Ch23

PT Ch23 - Exam Name_ MULTIPLE CHOICE. Choose the one...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A ________ security divides the cash flow from the underlying pool of mortgages on a pro rata basis to the securityholders, while a ________ security is created by altering that distribution of principal and interest from a pro rata distribution to an unequal distribution. 1) A) hedged pass - through; prepayment mortgage - backed B) mortgage pass - through; prepayment mortgage - backed C) mortgage pass - through; stripped mortgage - backed D) hedged pass - through; stripped mortgage - backed 2) The mission of Fannie Mae and Freddie Mac is to support the liquidity and stability of the mortgage market by ________. 2) A) selling but not buying mortgage - backed securities. B) buying and selling railway trusts. C) creating pass - through securities that are not guaranteed. D) None of these 3) Which of the below statements is FALSE? 3) A) PAC bondholders have priority over all other classes in the CMO issue in receiving principal payments from the underlying collateral. B) The greater certainty of the cash flow for the non - PAC bonds comes at the expense of the PAC classes, called the support bonds or companion bonds. It is these bonds that absorb the prepayment risk. C) In 1987, CMO issuers began issuing bonds with the characteristic that if prepayments are within a specified range, the cash flow pattern is known. The greater predictability of the cash flow for these classes of bonds, referred to as planned amortization class (PAC) bonds, occurs because there is a principal repayment schedule that must be satisfied. D) Because PAC bonds have protection against both extension risk and contraction risk, they are said to provide two - sided prepayment protection. 4) Suppose that an investor owns a pass - through in which the remaining mortgage balance at the beginning of a month is $200 million. Assuming that the CPR is 4.00% and the scheduled principal payment is $2.5 million, what is the estimated prepayment for this month? 4) A) $670,741 B) $670,681 C) $670,701 D) $670,721 5) One of the three key innovations in the CMO market is ________. 5) A) planned amortization class bonds. B) accrual tranches. C) sequential - pay tranches. D) All of these 6) Traditional corporate bond buyers sought a structure with both the characteristics of a ________ and high credit quality. While CMOs satisfied the ________, they did not satisfy the ________. 6) A) government bond; first condition; second condition B) government bond; second condition; first condition C) corporate bond; second condition; first condition D) corporate bond; first condition; second condition 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
7) Nonagency MBS are issued by conduits of ________. 7) A) commercial banks. B) entities not associated with either commercial banks or investment banking firms.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 5

PT Ch23 - Exam Name_ MULTIPLE CHOICE. Choose the one...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online