What are the WAC and WAM of a pass-through security?
What will be an ideal response?
Not all of the mortgages that are included in a pool of mortgages that are securitized have the same mortgage rate and the same maturity. Consequently, when describing a pass through security, a weighted average coupon rate and a weighted-average maturity are determined.
A weighted-average coupon rate (WAC) is found by weighting the mortgage rate of each mortgage loan in the pool by the amount of the mortgage outstanding. A weighted average maturity (WAM) is found by weighting the remaining number of months to maturity for each mortgage loan in the pool by the amount of the mortgage outstanding.
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Capitalizing an expenditure rather than recording it as a revenue expenditure
a. affects the amount of net income reported during an accounting period, but has no effect on the total book value of plant assets on the balance sheet. b. affects the total book value of plant assets on the balance sheet, but has no effect on the amount of net income reported during an accounting period. c. affects the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period. d. has no effect on the book value of plant assets on the balance sheet or the amount of income reported on the income statement.
For price discrimination to work ________
A) the market must be segmentable and the segments must show similar intensities of demand B) members in the lower-price segment must be able to resell the product to the higher-price segment C) competitors must be able to undersell the firm in the higher-price segment D) the practice must not breed customer resentment and ill will E) the extra revenue derived from price discrimination must not exceed the cost of segmenting and policing the market
Management is considering replacing an existing sales commission compensation plan with a fixed salary plan. If the change is adopted, the company's
a. break-even point must increase. b. margin of safety must decrease. c. operating leverage must increase. d. profit must increase.
Many companies that use the declining-balance method of depreciation switch to the straight-line method at some point in the life of a depreciable asset. When does that switch normally occur?
A. never, since one method must be applied consistently throughout the life of an asset B. in the last quarter of the life of the asset C. when the depreciation cost under the accelerated method exceeds the depreciation cost under the straight-line method D. midpoint in the life of the asset