Why pac i or pac ii have smaller average life variability

Assignment Help Management Theories

Reference no: EM131779383

Question: Suppose that $1 billion of pass-through is used to create a CMO structure with a PAC bond with a par value of $700 million (PAC I), a support bond with a schedule (PAC II) with a par value of $100 million, and a support bond without a schedule with a par value of $200 million.

a. Will the PAC I or PAC II have the smaller average life variability? Why?

b. Will the support bond without a schedule or the PAC II have the greater average life variability? Why?

Reference no: EM131779383

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