Why is an assumed prepayment speed necessary to project the cash flow of a pass-through?
What will be an ideal response?
To value a pass-through security, it is necessary to project its cash flow. The difficulty is that the cash flow is unknown because of prepayments. The only way to project a cash flow is to make some assumption about the prepayment rate over the life of the underlying mortgage pool. The prepayment rate assumed is called the prepayment speedor, simply, speed. If the assumed prepayment rate is inaccurate or misleading, the resulting cash flow is not meaningful for valuing pass-throughs.
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Find the area under the normal curve between the Z values 0.99 and 2.63.
a. 15.68% b. 13.24% c. 14.46% d. 19.80%
A common form of the product-mix linear programming problem seeks to find that combination of products and the quantity of each that maximizes profit in the presence of limited resources
Indicate whether the statement is true or false
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A. ?A B. ?B C. ?C D. ?D E. ?E
Which of the following is an example of a lean production initiative?
a. Rearranging factory floor layouts b. Using statistical quality control charts c. Developing long-term relationships with excellent suppliers d. Reducing delivery problems