Securities that are backed by pool of loans

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Reference no: EM131983152

There are some securities that are backed by a pool of loans. These loans have a schedule of interest and principal payments every month and give each borrower whose loan is in the pool the right to payoff their respective loan at any time at par.

Suppose that a portfolio manager purchased one of these securities. Can the portfolio manager rely on the schedule of interest and principal payments in determining the cash flow that will be generated by such securities (assuming no borrowers default)? Why or why not?

Reference no: EM131983152

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