which statements are true about po tranches

D. have the same prepayment risk as companion classes. Corporate and municipal bond trades settle in clearing house funds. Treasury bill prices are rising, All of the following statements are true regarding Government National Mortgage Association pass-through certificates EXCEPT: TIPS $81.25 $100B. B. increase prepayment risk to holders of that tranche Collateralized mortgage obligations are backed by mortgage pass-through certificates that are held in trust. If interest rates fall, then the average maturity will shorten, due to a higher prepayment rate than expected. which statements are true about po tranches. II. Newer CMOs divide the tranches into PAC tranches and Companion tranches. Which statement is TRUE about PO tranches? Because the companion absorbs both of these risks, it has the greatest risk and trades at the highest yield. are stableD. The interest earned from which of the following is exempt from state and local tax? III. Electromagntisme PCSI MPSI - | Classe | prpa PCSI MPSI PTSI Which of the following statements are TRUE regarding CMOs? \hline \text { Operating income } & \text { } & \text { } \\ Interest payments on CMOs are made pro-rata to all tranches, but principal repayments that are made earlier than the PAC maturity are made to the Companion classes before being applied to the PAC (this would occur if interest rates drop); while principal repayments made later than anticipated are applied to the PAC maturity before payments are made to the Companion class (this would occur if interest rates rise). which statements are true about po tranches. Beitrags-Autor: Beitrag verffentlicht: 22. Debt Securities: Government Debt Flashcards | Quizlet $.025 per $1,000B. D. Treasury Stock, Which of the following are TRUE statements about Treasury Bills? a. interest is paid at maturity CMO tranches are generally AAA rated (or have an implied AAA rating because the tranches are backed by GNMA, FNMA or Freddie Mac pass-through certificates). D. FNMA bond. A Targeted Amortization Class (TAC) is a variant of a PAC. All of the following would be considered examples of derivative products EXCEPT: which statements are true about po tranchesdead island crossplay xbox pcdead island crossplay xbox pc Thus, CMOs give holders a form of call protection not available in regular pass-through certificates. Call and put options are the most basic derivative - option values are derived from the price movements of the underlying stock, in addition to time premiums on the contracts. IV. A "derivative" product is one whose value is "derived" via a "formula" from an underlying investment. Each tranche has a different expected maturity, Each tranche has a different level of market risk Interest payments are still made pro-rata to all tranches, but principal repayments that are made earlier than the PAC maturity are made to the Companion classes before being applied to the PAC (this would occur if interest rates drop); while principal repayments made later than anticipated are applied to the PAC maturity before payments are made to the Companion class (this would occur if interest rates rise). on the same day as trade date C. more than the rate on an equivalent maturity Treasury Bond which statements are true about po tranches - Amolemrooz.ir a. CMOs are available in $1,000 denominations Fannie Mae debt securities are negotiable If interest rates fall, then the expected maturity will shorten, due to a higher prepayment rate than expected. A. PAC tranche For example, 30 year mortgages are now typically paid off in 10 years - because people move. CMOs are subject to a lower degree of prepayment risk than the underlying pass-through certificates. CMOs are available in $1,000 denominations, as opposed to pass-through certificates that are $25,000 denominations. default risk, A 5 year, 3 1/4% treasury note is quoted at 101-4 - 101-8. All of the following trade "and interest" EXCEPT: Of the choices offered, which security is least subject to purchasing power risk? Treasury Bills II. \begin{array}{lccc} Principal is paid before all other tranches I, II, IVC. D. GNMA Pass Through Certificates. \end{array} C. 140% c. CMOs are subject to a higher level of prepayment risk than a pass through certificate Thrift institutions. Thus, the earlier tranches are retired first. Thus, the average life of pass-through certificates that represent ownership of that mortgage pool will lengthen; as will the average life of CMO tranches which are derived from those certificates (though not to the same extent). A floating rate CMO tranche is MOST similar to a: The best answer is B. Governments, on which accrued interest is computed on an actual day month/actual day year basis, Agency securities' accrued interest is computed on a 30 day month/360 day year basis. Holders of CMOs receive interest payments: A. monthlyB. 1. B. prepayment speed assumption \text { Gain (loss) from sale of investments } & \$ 7,500 & \$(12,000) \\ They are sold at auction by the Treasury on an "as needed" basis to meet unexpected cash shortfalls, so they are not part of the regular auction cycle. When interest rates rise, the price of the tranche risesB. How much will the customer receive at each interest payment? III. Each receipt is, essentially, a zero-coupon obligation, that is purchased at a discount, and which is redeemable at par at a pre-set date. They have a much higher minimum to discourage small investors (who tend to be less sophisticated) from buying them - because they have difficult to quantify risks of shortening or lengthening maturities, due to interest rates falling or rising, respectively. A. I, II, IIID. C. certificates are issued in minimum units of $25,000 C. marketability risk A Treasury Bond is quoted at 95-24. All of the following statements are true about the Federal National Mortgage Association Pass-Through Certificates EXCEPT: I. Fannie Mae is a publicly traded company d. Savings (EE) bonds, All of the following agencies provide financing for residential housing EXCEPT: IV. CMO holders receive monthly payments derived from the underlying mortgage backed pass-through certificates. All of the following statements are true regarding money market funds EXCEPT: A. typical maturities of securities held in the portfolio are 30 days or less B. fund dividends are not taxable if reinvested in additional shares money market funds are typically sold without a sales charge money market funds impose management fees. There is usually a cap on how high the rate can go and a floor on how low the rate can drop. C. Freddie Mac is a corporation that is publicly traded derivative product b. treasury bills Which is the most important risk to discuss with this client? A TAC is a variant of a PAC that has a lower degree of prepayment risk serial structures Fannie Mae debt securities are non-negotiable, Fannie Mae is a publicly traded company D. yearly, Wide swings in market interest rates would affect which of the following for holders of collateralized mortgage obligations? II. B. Income from REITs is fully taxable as well. interest payments are exempt from state and local tax IV. Treasury bill This is a tranche that only receives the interest payments from an underlying mortgage, and it is created with a corresponding PO (Principal Only) tranche that only receives the principal payments from that mortgage. II. PAC tranche holders have lower prepayment risk than companion tranche holdersD. DEBT: US GOV Flashcards | Quizlet If interest rates drop, homeowners will refinance their mortgages, increasing prepayment rates on CMOs Treasury bill prices are rising, interest rates are falling 89 The CMO purchaser buys a specific tranche. An annual upward adjustment due to inflation is not taxable in that year; an annual downward adjustment due to deflation is not tax deductible in that year.D. Companion tranches are the shock absorber tranches, that absorb prepayment risk out of a TAC (Targeted Amortization Class) tranche; or both prepayment risk and extension risk out of a PAC (Planned Amortization Class) tranche. T-bills are issued at a discount, T-bills are registered in the owner's name in book entry form Federal, State and Local income tax. PAC tranches increase prepayment risk to holders of that tranche From the basis quote, the dollar price is computed. receives payments on a pro-rata basis with other tranchesD. GNMA pass through certificates are guaranteed by the U.S. Government Accrued interest on the certificates is computed on a 30 day month / 360 day year basis, All of the following statements are true regarding GNMA "Pass Through" Certificates EXCEPT: II. These represent a payment of both interest and principal on the underlying mortgages. a. reduce prepayment risk to holders of that tranche which statements are true about po tranches II. The principal portion of a fixed rate mortgage makes smaller payments in the early years, and larger payments in the later years. $35.00 On the other hand, if market interest rates rise, homeowners stay in their existing homes longer than expected and the rate of expected principal repayments slows, extending the maturity of the tranches. All of the following statements are true regarding this trade of T-notes EXCEPT: C. discount bond B. serial structures The housing bubble that ended badly in 2008 with a market crash was fueled by massive issuance of sub-prime mortgages to unqualified home buyers, that were then packaged into CDOs and sold to unwitting institutional investors who relied on the credit rating assigned by S&P or Moodys. Which statements are TRUE about PO tranches? IV. All of them These credit ratings agencies really did not understand the complex structure of CDOs and how risky their collateral was (sub-prime mortgage loans that were often no documentation liar loans). Which CMO tranche has the least certain repayment date? Which of the following statements are TRUE regarding GNMA "Pass Through" Certificates? Agency CMOs carry the direct or implied guarantee of the U.S. Government while Private Label CMOs do not have such a guarantee A. Planned amortization classes give their prepayment risk and extension risk to an associated companion class - leaving the PAC with the most certain repayment date. $$ A. term structures This is a tranche that only receives the principal payments from an underlying mortgage, and it is created with a corresponding IO (Interest Only) tranch that only receives the interest payments from that mortgage. If market interest rates drop substantially, homeowners will refinance their mortgages and pay off their old loans earlier than expected. B. Therefore, as interest rates move up, the interest rate paid on the tranche goes up as well; and when interest rates drop, the interest rate paid on the tranche goes down as well. Principal repayments made earlier than expected are applied to the PAC prior to being applied to the Companion tranche Thus, the rate of principal repayments varies, depending on market interest rate movements. b. increase prepayment risk to holders of that tranche IV. C. Municipal bonds Plain Vanilla D. actual maturity of the underlying mortgages. Certain CMO tranches may represent a right to receive interest only ("IOs"), principal only ("POs") or an amount that remains after floating-rate tranches are paid (an "inverse floater"). Companion ClassD. B. Freddie Mac is an issuer of mortgage backed pass-through certificates FRB All of the following statements are true about PAC tranches EXCEPT: A. Each CMO tranche has an expected maturity, but the actual repayments are based on the rate of principal repayments that come in from the underlying mortgages - and this rate can vary. Treasury NotesC. This pool, with say an average life of 12 years, is "chopped-up" into many different tranches, each with a given "expected life." which statements are true about po tranches I and IVC. ** New York Times v. Sullivan, $1964$ CMBs are Cash Management Bills. Science, 28.10.2019 21:29, nicole8678. A. receives payments prior to all other tranchesB. fallC. What is not eliminated, however, is credit risk. When interest rates rise, the price of the tranche falls which statements are true about po tranches Which statements are TRUE regarding Z-tranches? T-bills are issued in bearer form in the United States Ch.2 - *Quiz 2. Freddie Mac debt issues are directly guaranteed by the U.S. Government Targeted Amortization Class. Do not confuse this with the "average life" of the mortgages in the pool that backs the CMO. Which of the following statements are TRUE regarding CMOs? U.S. Treasury securities are considered subject to which of the following risks? A. Thus, the interest rate on a short-term T-Bill is the pure interest rate - the same thing as the risk-free rate of return. There is no such thing as an AAA+ rating; AAA is the highest rating available. The interest coupons are sold off separately from the principal portion of the obligation B. mortgage backed securities created by a bank-issuer When all of the interest is paid, the "notional principal" has been brought to par and the security is now paid off. c. the trade will settle in Fed Funds The collateral backing private CMOs consists of: A. private placements offered under Regulation DB. Treasury STRIPS are quoted in 32nds, Which characteristic is NOT common to both Treasury STRIPS and Treasury Notes? I. When interest rates rise, prepayment rates rise The longer the maturity, the greater the price volatility of a negotiable debt instrument. All of the following statements are true regarding GNMA "Pass Through" Certificates EXCEPT: Which of the following statements are TRUE regarding the settlement of trades in U.S. Government bonds? All of the following are true statements regarding Treasury Bills EXCEPT: A. T-Bills are issued in bearer form in the United States B. T-Bills are registered in the owner's name in book entry form C. T-Bills are issued at a discount D. T-Bills are non-callable. marketability risk Also note that even though Standard and Poors downgraded Treasury Debt to an AA+ rating in the summer of 2011, Moodys and Fitchs retained their AAA ratings. IV. Approximately how much will the customer pay, disregarding commissions and accrued interest? Regulations: Securities Exchange Act of 1934, Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Daniel F Viele, David H Marshall, Wayne W McManus, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman. Short Term Investment Fund for Puerto Rico Residents, Inc. The note pays interest on Jan 1st and Jul 1st. \quad\quad\quad\textbf{Stockholders' Equity}\\ a. If interest rates rise, then the average maturity will lengthen, due to a lower prepayment rate than expected. Thus, the certificate was priced as a 12 year maturity. II. Treasury Receipts represent an undivided interest in a portfolio of U.S. Government securities held by a trustee. a. T-bills are traded at a discount from par Not too shabby. If this distribution well models the applicant pool, a randomly chosen applicant would have what probability of scoring in the following regions? d. payment of interest and principal on the underlying security is guaranteed by the US government, Which of the following statements are true regarding the trading of government and agency bonds? C. Plain Vanilla Tranche Product management is the new "agile" (or worse, SAFE). mortgage backed securities created by a bank-issuerC. \textbf{For the Year Ended December 31, 2014 and 2015}\\ Even though the interest rate is fixed, the holder receives a higher interest payment, due to the increased principal amount. Thus, the PAC class is given a more certain maturity date; while the Companion class has a higher level of prepayment risk if interest rates fall; and a higher level of so-called extension risk - the risk that the maturity may be longer than expected, if interest rates rise. b. the securities are sold at a discount C. U.S. Government bond Treasury STRIPS All of the following are true statements regarding revenue bonds EXCEPT: A) issuance of the bonds is dependent on earnings requirements. Which statements are TRUE about PO tranches? Reinvestment risk is greater for Ginnie Maes than for U.S. $4,906.25 **e.** Collin v. Smitb, $1978$. \text{Unrealized gain (loss) on available-for-sale investments}&&&(16,400)\\ III. Yield quotes on CMOs are based on the expected life of the tranche that is quoted. Furthermore, as interest rates drop, the value of the fixed income stream received from those mortgages increases (since these older mortgages are providing a higher than market rate of return), so the market value of the security will increase. II. Treasury STRIPS are quoted in 32nds

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