which statements are true about po tranches which statements are true about po tranches

In periods of deflation, the principal amount received at maturity is unchanged at par, In periods of deflation, the amount of each interest payment will decline B. a dollar price quoted to a 5.00 basis Homeowners will prepay mortgages when interest rates fall, so they can refinance at more attractive lower current rates. All of the following statements are true regarding this trade of T-notes EXCEPT: 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"). B. Treasury STRIPS are quoted in 32nds, Which characteristic is NOT common to both Treasury STRIPS and Treasury Notes? II. All of the following statements are true about PAC tranches EXCEPT: A. Extended maturity risk 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. d. TAC tranche, Which statement is FALSE about CMBs? interest rates are rising 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. are volatile. C. Series EE Bonds $1,000C. II. In periods of deflation, the principal amount received at maturity is unchanged at par, Which statement is FALSE regarding Treasury Inflation Protection securities? I. Prepayment Rate Minimum $100 denominations c. CMB CMOs are often quoted on a yield spread basis to similar maturity: The best answer is C. Real Estate Investment TrustD. Which Collateralized Mortgage Obligation tranche has the MOST certain repayment date? rated based on the credit quality of the underlying mortgages The CMO is rated dependent on the credit quality of the mortgages underlying mortgage backed pass through securities held in trust. I When interest rates rise, the price of the tranche falls II When interest rates rise, the price of the tranche rises III When interest rates fall, the price of the tranche falls IV When interest rates fall, the price of the tranche rises" II. C. series structures A customer who wishes to buy will pay the "Ask" of 4.90. III. III. CMOs have a serial structure since they are divided into 15 - 30 maturities known as tranches; CMOs are rated AAA; and CMOs are more accessible to individual investors since they have $1,000 minimum denominations as compared to $25,000 for pass-through certificates. CMOs give the holder a limited form of call protection that is not present in regular pass-through obligations The annual accretion amount is taxable, since the underlying securities are U.S. I. Today 07:16 What type of bond offers a "pure" interest rate? TACs are like a one-sided PAC - they protect against prepayment risk, but not against extension risk. coupon rate remains at 4% a. IV. As interest rates rise, CMO values fall; as interest rates fall, CMO values rise. The longer the maturity, the greater the price volatility of a negotiable debt instrument. If interest rates are rising rapidly, which U.S. Government debt prices would be MOST volatile? Principal only strips (PO strips) are a fixed-income security where the holder receives the non-interest portion of the monthly payments on the underlying loan pool. D. Guaranteed by the U.S. Government, Which of the following statements are TRUE about the Government National Mortgage Association (GNMA)? Question 6 You bought a CMO tranche that does not receive any cash flows until all other tranches have been repaid and whose principal grows at a predetermined rate each period. It acts like a long-term zero coupon bond. C. Credit risk for GNMAs is the same as for equivalent maturity U.S. Government Bonds 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. treasury STRIPS, All of the following statements are TRUE about treasury receipts EXCEPT: Arrange the following CMO tranches from lowest to highest yield: II rated based on the credit quality of the underlying mortgages. Home . B. Conversely, when market interest rates fall, the rate of prepayments rises (prepayment risk) and the maturity shortens. Because the interest rate moves with the market, the price stays close to par - as is the case with any variable rate security. Beitrags-Autor: Beitrag verffentlicht: 22. Prepayment speed assumption I, II, III, IV. A government securities dealer quotes a 3 month Treasury Bill at 5.00 Bid - 4.90 Ask. Certificates are issued in minimum $25,000 denominations. If interest rates fall, then the expected maturity will shorten. Ginnie Mae is a U.S. Government Agency After reviewing the website, explain how not-for-profit organizations are rated. Quoted as a percent of par in 32nds There were no dividends. Thus, the earlier tranches are retired first. Market Value Which of the following is an example of a derivative product? When interest rates rise, prepayment rates rise IV. D. Collateral trust certificate, Treasury bond The interest income from direct issues of the U.S. Government and most agency obligations is subject to federal income tax but is exempt from state and local tax. Contract settlement by cash has different economic effects from those of a settlement by delivery. It gets no payments until all prior tranches are retired. A. interest accrues on an actual day month; actual day year basis This is the discount earned over the life of the instrument. b. floating rate tranche II. Federal Home Loan Bank Bonds. A. a dollar price quoted to a 4.90 basis If a customer buys 5 T-notes on Friday, April 4th in a regular way trade, how many days of accrued interest are owed to he seller? Governments. Which statement is FALSE when comparing Agency CMOs to Private Label CMOs? holders of "plain vanilla" CMO tranches have lower prepayment risk Which of the following statements regarding collateralized mortgage obligations are TRUE? I When interest rates rise, the price of the tranche fallsII When interest rates rise, the price of the tranche risesIII When interest rates fall, the price of the tranche fallsIV When interest rates fall, the price of the tranche rises. Agency CMOs are traded in the public markets while Private Label CMOs can only be sold in private placements and cannot be traded b. CDO In periods of inflation, the coupon rate remains unchanged The first 3 statements are true. the market is regulated by the SEC, the trading market is very active, with narrow spreads, Which risk is NOT applicable to Ginnie Mae Pass Through Certificates? B. Thus, the certificate was priced as a 12 year maturity. mortgage backed securities created by a bank-issuerC. a. reduce prepayment risk to holders of that tranche C. $162.50 IV. IV. IV. lamar county tx property search 2 via de boleto These are issued at a discount to face and each interest payment made brings the notional principal of the bond closer to par. Ginnie Mae bonds are traded Over the Counter, Ginnie Mae is a U.S. Government Agency D. In periods of inflation, the principal amount received at maturity is more than par. The underlying mortgage backed pass-through certificates are issued by agencies such as FNMA, GNMA and FHLMC, all of whom have an AAA (Moodys or Fitchs) or AA (Standard and Poors) credit rating. D. combined serial and series structures. (Attachments: # 1 Civil Cover Sheet) (Khoury, Cholla) (Entered: 06/30/2021). CDOs - Collateralized Debt Obligations - are structured products that invest in CMO tranches (and they can also invest in other debt obligations that provide cash flows). Kabuuang mga Sagot: 2 . D. the same level of prepayment risk but a higher level of extension risk than a Planned Amortization Class, the same level of prepayment risk but a higher level of extension risk than a Planned Amortization Class, Which statements are TRUE regarding Z-tranches? C. U.S. Government Agency Securities trade flat A. You have to complete all course videos, modules, and assessments and receive a minimum score of 75% on each assessment to receive credit. Interest Rate Conversely, when interest rates fall (prepayment risk) the principal is being paid back at an earlier than expected date, so less interest is being received and the price falls (if interest rates fall drastically, the holder might get less interest back than what was originally invested). IV. Securities and Exchange Commission c. certificates are issued in minimum units of $25,000 B. interest payments are subject to state and local tax III. principal amount is adjusted to $1,050 d. TIPS, If the principal amount of a treasury inflation protection security is adjusted upwards due to inflation, the adjustment amount is: I. $4,906.25 Treasury BondD. An annual upward adjustment due to inflation is taxable in that year; an annual downward adjustment due to deflation is not tax deductible in that year.B. c. semi-annually Because no interest payments are received, the bond is not subject to reinvestment risk - the risk that interest rates will drop and the interest payments will be reinvested at lower rates. III. I, II, IIIC. If the mortgages backing a Ginnie Mae Pass Through Certificate are prepaid (if interest rates have dropped), the certificate holder receives payments that are a return of principal, and that, when reinvested at lower current rates, produce a lower return (this is reinvestment risk). part of budgeting? Treasury bill Treasury Bills are original issue discount obligations. Mortgage backed pass-through certificate A. all at once at maturity date of the tranche purchased A A TAC is a variant of a PAC that has a lower degree of prepayment risk Both securities are issued by the U.S. Government can be backed by sub-prime mortgages Approximately how much will the customer pay, disregarding commissions and accrued interest? how to put bobbin case back together singer; jake gyllenhaal celebrity look alike; carmel united methodist church food pantry hours; new year's rockin' eve 2022 performers Plain vanilla CMO tranches are subject to both prepayment and extension risks. Both securities are money market instruments, Both securities are sold at a discount C. 10 mortgage backed pass through certificates at par $$ III. I. Sallie Mae is a privatized agency D. When interest rates rise, the interest rate on the tranche rises, When interest rates rise, the price of the tranche falls, Which statement is TRUE about IO tranches? I. a. prepayment speed assumption Governments. derivative product If interest rates drop, the market value of the CMO tranches will increase matt_omalley. C. eliminate prepayment risk to holders of that tranche For example, there may be 10 tranches in the pool, with the first tranche having an expected life of 1-2 years, the second tranche having an expected life of 3-5 years, the third tranche having an expected life of 5-7 years, etc. Treasury STRIPS are not a derivative, because the value of the coupons "stripped" from the Treasury bonds is a direct correlation to the interest payments received from the underlying U.S. Government securities. I When interest rates rise, the price of the tranche fallsII When interest rates rise, the price of the tranche risesIII When interest rates fall, the price of the tranche fallsIV When interest rates fall, the price of the tranche rises I and IV Companion ClassD. If interest rates drop, homeowners will refinance their mortgages, increasing prepayment rates on CMOs What is the current yield, disregarding commissions? A. FNMA is a publicly traded company American depositary receiptC. **a. Prepayment rate If prepayment rates slow down, the PAC tranche will receive its sinking fund payment prior to its companion tranchesB. If interest rates rise, then the expected maturity will lengthen These are issued at a deep discount to face. IV. Principal repayments made later than expected are applied to the PAC prior to being applied to the Companion tranche I. Thus, payments are received monthly. Holders of CMOs receive interest payments: A. monthlyB. A. GNMA securities are guaranteed by the U.S. Government CMOs are Collateralized Mortgage Obligations. B. The collateral backing private CMOs consists of: A. private placements offered under Regulation DB. A customer buys 1 note at the ask price. b. the yield to maturity will be higher than the current yield d. the credit rating is considered the highest of any agency security, interest payments are exempt from state and local taxes, Which of the following are TRUE regarding collateralized mortgage obligations? purchasing power risk 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: $$ "Plain vanilla" CMOs are relatively simple - as payments are received from the underlying mortgages, interest is paid pro-rata to all tranches; but principal repayments are paid sequentially to the first, then second, then third tranche, etc. The best answer is C. The bond is quoted at 95 and 24/32nds. Product management is the new "agile" (or worse, SAFE). The interest income on U.S. Government obligations and most agency obligations is subject to Federal income tax but is exempt from state and local tax. Therefore, both PACs and TACs provide "call protection" against prepayments during period of falling interest rates. I, II, III, IV. There are no new T-Receipt issues coming to market. which statements are true about po tranches. IV. Fannie Mae debt securities are non-negotiable, Fannie Mae is a publicly traded company Agency CMOs carry the direct or implied guarantee of the U.S. Government while Private Label CMOs do not have such a guarantee C. $4,920.00 A. b. Sallie Mae The Companion class is given a more certain maturity date than the PAC class CMOs are issued by government agencies, CMOs are backed by agency pass through securities held in trust in varying dollar amounts every month 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. Which statements are TRUE regarding treasury STRIPS? Each tranche has a different expected maturity, Each tranche has a different level of market risk The Treasury does not issue 1 week T-Bills. Macaulay durationD. I Treasury Stock receives dividends II Treasury Stock votes III Treasury Stock reduces the number of shares outstanding IV Treasury Stock purchases are used to increase reported Earnings Per Share A. I and II B. III and IV C. II, III, IV D. I, II, III, IV B. III and IV Federal Farm Credit Funding Corporation BondsD. B. The holder is not subject to reinvestment risk, Which of the following statements are TRUE about Treasury Receipts? d. Freddie Mae, Which of the following would NOT purchase STRIPS? c. predicted standardization amortization c. the interest coupons are sold off separately from the principal portion of the obligation Yield quotes on CMOs are based on the expected life of the tranche that is quoted. C. the trade will settle in Fed Funds A 5 year 3 1/2% Treasury Note is quoted at 101-4 - 101-8. loan to value ratio. Compute the derivative of the given function and find the slope of the line that is tangent to its graph for the specified value of the independent variable. Which of the following is an original issue discount obligation? IV. They are the shortest-term U.S. government security, often with maturities as short as 5 days. However, the interest income on mortgage pass through certificates issued by Fannie Mae and Ginnie Mae is fully taxable. Which of the following is an original issue discount obligation? There is usually a cap on how high the rate can go and a floor on how low the rate can drop. I CMOs make payments to holders monthlyII CMOs receive the same credit rating as the underlying pass-through securities held in trustIII CMOs are subject to a lower level of prepayment risk than the underlying pass-through certificatesIV CMOs are available in $1,000 denominations, A. II, III, IVB. Governments. If prepayments increase, they are made to the Companion class first. IV. Prepayment risk Mortgage backed pass-through certificates are paid off in a shorter time frame than the full life of the underlying mortgages. TACs do not offer the same degree of protection against extension risk as do PACs during periods of rising interest rates - hence their prices will be more volatile during such periods. A. C. discount bond A 5-year, $1,000 par, 3 1/2% Treasury note is quoted at 101-4 - 101-8. a. GNMA is empowered to borrow from the treasury to pay interest and some principal if necessary If the principal amount of a Treasury Inflation Protection Security is adjusted upwards due to inflation, the adjustment amount is taxable in that year as ordinary interest income. Treasury bill prices are falling ", An investor in 30 year Treasury Bonds would be most concerned with: Which statement is TRUE regarding the tax treatment of the annual adjustment to the principal amount of a Treasury Inflation Protection Security? All of the following statements are true about Treasury Bills EXCEPT: A. the U.S. Treasury issues 1 week T- BillsB. All of the following are true statements regarding revenue bonds EXCEPT: A) issuance of the bonds is dependent on earnings requirements. c. 95 Which is the most important risk to discuss with this client? General Obligation Bond U.S. Government and Agency securities never trade flat (meaning without accrued interest), since a default is almost impossible. Accrued interest on the certificates is computed on an actual day month / actual day year basis Interest payments are still made pro-rata to all tranches, but principal repayments made earlier than that required to retire the PAC at its maturity are applied to the Companion class; while principal repayments made later than expected are applied to the PAC maturity before payments are made to the Companion class. I, II, IVC. Principal is paid before all other tranches Bond classes can be categorised as senior tranches or subordinated (junior) tranches. The note pays interest on Jan 1st and Jul 1st. on the same day as trade date These represent a payment of both interest and principal on the underlying mortgages. T-Notes are sold by competitive bidding at auction conducted by the Federal Reserve 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. II. 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. 2/32nds = .0625% of $1,000 par = $.625.