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Which of the following will have the greatest average life

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Suppose that $1 billion of pass-throughs is used to create a CMO structure with a PAC bond with a par value of $700 million and a support bond with a par value of $300 million. Answer the question below:

Which of the following will have the greatest average life variability and least average life variability: (i) the collateral, (ii) the PAC bond, or (iii) the support bond? Why?

Reference no: EM131145247

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