which statements are true about po tranches

A. collateral trust certificateB. A. GNMA certificate III. Treasury Bond a. interest accrues on an actual day month; actual day year basis Treasury Bills are original issue discount obligations. \textbf{Selected Balance Sheet Items}\\ CMOs are backed by agency pass-through securities held in trustC. The best answer is B. The logic behind this tax treatment is that the mortgage interest paid by the homeowners was fully deductible from both federal, state, and local taxes. Planned Amortization Class ", An investor in 30 year Treasury Bonds would be most concerned with: Besides, these portions of bonds or mortgages have varying amounts of risk and maturity. If interest rates rise, then the expected maturity will lengthen B. How much will the customer receive at each interest payment? The spread between the bid and ask is 2/32nds. II. Treasury Receipts, All of the following are true statements about U.S. Government Agency securities EXCEPT: receives payments on a pro-rata basis with other tranchesD. how to build a medieval castle in minecraftEntreDad start a business, stay a dad. fallC. II. Treasury Bills are not subject to reinvestment risk because they are essentially short term "zero-coupon" obligations. Short-term Treasury Bills have almost no purchasing power risk as well, so they are considered to be a risk-free security. A CMO divides the cash flow from a pool of underlying mortgages into a number of tranches, each with a different maturity. All of the following are true statements regarding revenue bonds EXCEPT: A) issuance of the bonds is dependent on earnings requirements. Sallie Mae stock is listed and trades If interest rates fall, then the expected maturity will lengthen They are sold at auction by the Treasury on an "as needed" basis to meet unexpected cash shortfalls, so they are not part of the regular auction cycle. CMOs are issued by government agencies, CMOs are backed by agency pass through securities held in trust CMOs have investment grade credit ratings A TAC is a variant of a PAC that has a higher degree of extension risk which statements are true about po tranches. Payment is to be made in: Which is considered to be a direct obligation of the US government? IV. d. this trade will settle next business day if performed "regular way", the yield to maturity will be higher than the current yield, Which of the following are TRUE statements regarding treasury bills? Which statement is TRUE about floating rate tranches? CMOs have the highest investment grade credit ratingsD. Both securities pay interest at maturity, The physical securities which are the underlying collateral for Treasury Receipts are: If the corporate lessee were to default; and then declare bankruptcy, the IRB holders would be left with worthless paper. c. treasury bonds This makes CMOs more accessible to small investors. C. Agency CMOs take on the credit rating of the underlying agency securities while Private Label CMOs are assigned credit ratings by independent credit ratings agencies A Z-tranch is a zero tranche that receives no payments, either interest or principal, until all other tranches before it are paid off. IV. C. more than the rate on an equivalent maturity Treasury Bond True, the transition to the post-growth era won't be easy for the CCP or the Chinese people if income and wages level off or worsen, and if a declining tax base can't sustain an aging population. IV. I. Both securities are issued by the U.S. Government Thus, there is no purchasing power risk with these securities. These are issued at a deep discount to face. Treasury Notes III. Instead of being backed by mortgages guaranteed by Fannie, Freddie or Ginnie, they are backed by "private label" mortgages - meaning mortgages that do not qualify for sale to these agencies (either because the dollar amount of the mortgage is above their purchase limit or they do not meet Fannie, Freddie or Ginnie's underwriting standards). Published in category Business, 04.09.2020 >> "Which statements are TRUE about IO tranches? on the business day after trade date, A customer buys 5M of 3 1/4% Treasury Bonds at 98-8. principal amount is adjusted to $1,050 If interest rates rise, then the expected maturity of a CMO tranche will lengthen, due to a lower prepayment rate than expected. III. All of the following investments give a rate of return that cannot be affected by "reinvestment risk" EXCEPT: The CDO market collapsed with the housing crash in 2008-2009 and has still not recovered (as of 2019). The Stanford-Binet test scores are well modeled by a Normal model with a mean of 100 and a standard deviation of 16. Which statements are TRUE about IO tranches? All of the following statements are true about the Federal National Mortgage Association Pass-Through Certificates EXCEPT: T-Bills trade at a discount from par which statements are true about po tranchesmichelle woods role on burn notice. If the inflation rate during the first year of the security's life is 5%, the: abbreviation for Collateralized Debt Obligation, this is a structured product that invests in CMO tranches and was used to create tranches based on underlying sub-prime mortgages. Treasury Bills are typically issued for which of the following maturities? C. Plain Vanilla Tranche Which statement is TRUE about IO tranches? B. Freddie Mac Pass Through Certificates The interest received from a Collateralized Mortgage Obligation is subject to: Which statement is TRUE regarding the tax treatment of the annual adjustment to the principal amount of a Treasury Inflation Protection Security? If a customer buys 5 T-notes on Monday, Mar 31st in a regular way trade, how many days of accrued interest are owed to the seller? Which CMO tranche will be offered at the lowest yield? Treasury Bonds are issued in either bearer or registered form Today 07:16 For example, 30 year mortgages are now typically paid off in 10 years - because people move. Treasury STRIPS This is true because when the certificate was purchased, assume that the average life of the underlying 15 year pool (for example) was 12 years. III. Market interest rate movements have no effect on the stated interest rate paid by the security; and would not affect the credit rating of the issue. Thus, when interest rates fall, prepayment risk is increased. When the bills mature, the difference between the purchase price and the redemption value at par is taxable as interest income. I Treasury Stock receives dividends II Treasury Stock votes III Treasury Stock reduces the number of shares outstanding IV Treasury Stock purchases are used to increase reported Earnings Per Share A. I and II B. III and IV C. II, III, IV D. I, II, III, IV B. III and IV III. Bank issuers make non-conforming mortgages that cannot be sold to Fannie, Freddie or Ginnie and rather than hold them as investments, they can pool them into mortgage backed securities which are then placed into trust and sold as private label CMOs. PAC tranche holders have higher extension risk than companion tranche holders. Salesforce 401 Dev Certification Questions Answers Part 1. Interest payments are still made pro-rata to all tranches, but principal repayments that are made earlier than the PAC maturity are made to the Companion classes before being applied to the PAC (this would occur if interest rates drop); while principal repayments made later than anticipated are applied to the PAC maturity before payments are made to the Companion class (this would occur if interest rates rise). mortgage backed securities created by a bank-issuerC. If interest rates rise, then homeowners will defer moving at the anticipated rate, since they have a good deal with their existing mortgage. the market is regulated by the SEC, the trading market is very active, with narrow spreads, Which risk is NOT applicable to Ginnie Mae Pass Through Certificates? I. The note pays interest on Jan 1 and Jul 1. Because they trade, the liquidity risk aspect of structured products is eliminated. Treasury STRIP Interest is paid semi-annually II. There is usually a cap on how high the rate can go and a floor on how low the rate can drop. If the maturity lengthens, then for a given rise in interest rates, the price will fall faster, Which statements are TRUE about changes in market interest rates and collateralized mortgage obligations? IV. Fannie Mae issues are directly backed by the full faith and credit of the U.S. Government A. Because the MBSs are AAA rated, the CMOs created from them are AAA rated as well. B. lower prepayment risk II. B. expected life of the tranche B. A customer buys 5M of the notes. D. the credit rating is considered the highest of any agency security. This is extension risk - the risk that the CMO tranche will have a longer than expected life, during which a lower than market rate of return is earned. A collateralized mortgage obligation is best defined as a derivative product. Treasury Bills are quoted on a yield to maturity basis If interest rates drop, the market value of the CMO tranches will increase. Therefore, both PACs and TACs provide call protection against prepayments during period of falling interest rates. D. Any of the above. III and IV onlyC. This is true because when the certificate was purchased, assume that the expected life of the underlying 15 year pool (for example) was 12 years. Thus, the PAC class is given a more certain maturity date and hence lower prepayment risk; while the Companion classes have a higher level of prepayment risk if interest rates drop; and they have a higher level of so-called extension risk - the risk that the maturity may be longer than expected, if interest rates rise. Therefore, as interest rates move up, the interest rate paid on the tranche steps up as well; and when interest rates drop, the interest rate paid on the tranche steps down as well. \hline D. Agency CMOs are traded in the public markets while Private Label CMOs can only be sold in private placements and cannot be traded. CMOs are available in $1,000 denominations, as opposed to pass-through certificates that are $25,000 denominations. $81.25 Interest received from all of the following securities is exempt from state and local taxes EXCEPT: A. Fannie Mae Pass Through CertificatesB. loan to value ratio. Thus, the certificate was priced as a 12 year maturity. Which of the following statements are TRUE about computerized trading of securities on exchanges? When compared to plain vanilla CMO tranches, Planned Amortization Classes have: IV. When interest rates rise, the price of the tranche fallsB. Interest is paid before all other tranches $$ Collateralized mortgage obligations may be backed by all of the following securities EXCEPT: \end{array} D. 50 mortgage backed pass through certificates at par. Securities and Exchange Commission Its price moves just like a conventional long term deep discount bond. Both securities are sold at a discount A. corporation or trust through which investors pool their money in order to obtain diversification and professional management If Treasury bill yields are dropping at auction, this indicates that: This pool, with say an average life of 12 years, is chopped-up into many different tranches, each with a given expected life. For example, there may be 10 tranches in the pool, with the first tranche having an expected life of 1-2 years, the second tranche having an expected life of 3-5 years, the third tranche having an expected life of 5-7 years, etc. All of the following trade "and interest" EXCEPT: Of the choices offered, which security is least subject to purchasing power risk? **b. IV. c. 96 III. I. III. Which statements are TRUE about PO tranches? Fannie Mae is a U.S. Government Agency TAC pricing will be more volatile compared to PAC pricing during periods of rising interest rates. TACs are like a one-sided PAC - they protect against prepayment risk, but not against extension risk. If interest rates rise, then the average maturity will lengthen, due to a lower prepayment rate than expected. Because the interest rate moves with the market, the price stays close to par - as is the case with any variable rate security. There is usually a cap on how high the rate can go and a floor on how low the rate can drop. $2.50 per $1,000D. B. Remember, government and agency securities are quoted in 32nds (with the exception of T-Bills, quoted on a yield basis). These are issued at a discount to face and each interest payment made brings the "notional principal" of the bond closer to par. Which of the following statements are TRUE regarding Treasury Stock? Again, these are derived via a formula. A 5-year, $1,000 par, 3 1/2% Treasury note is quoted at 101-4 - 101-8. Which statements are TRUE when comparing Companion CMO tranches to plain vanilla CMO tranches? FNMA pass through certificates are not guaranteed by the U.S. Government, Which of the following are TRUE statements regarding government agencies and their obligations? They are the shortest-term U.S. government security, often with maturities as short as 5 days. Thrift institutions. A. D. Companion. A. monthly A. interest accrues on an actual day month; actual day year basis Fully depreciated equipment costing $50,000 is discarded. Highland Industries Inc. makes investments in available-for-sale securities. C. Companion Class A. The CMO is rated dependent on the credit quality of the mortgages underlying mortgage backed pass through securities held in trust Which statement is FALSE regarding Treasury Inflation Protection securities? Which of the following statements are TRUE when comparing CMO PAC tranches to Companion tranches? B. a. not taxable Sallie Mae stock is listed and trades, Which of the following issue agency securities? GNMA pass through certificates are not guaranteed by the U.S. Government, GNMA is owned by the U.S. Government CMOs give the holder a limited form of call protection that is not present in regular pass-through obligations, "PSA" stands for: taxable in that year as long term capital gainsD. CMOs have a serial structure since they are divided into 15 - 30 maturities known as tranches; CMOs are rated AAA; and CMOs are more accessible to individual investors since they have $1,000 minimum denominations as compared to $25,000 for pass-through certificates. II. I. D. Freddie Mac debt issues are directly guaranteed by the U.S. Government. I. Ginnie Mae is a publicly traded company If the maturity lengthens, then for a given rise in interest rates, the price will fall faster. Ginnie Mae CertificateC. Kabuuang mga Sagot: 2 . II. Therefore, as interest rates move up, the interest rate paid on the tranche goes up as well; and when interest rates drop, the interest rate paid on the tranche goes down as well. Collateralized mortgage obligation values are derived from the underlying mortgage backed pass-through certificates held in trust by recutting the cash flows and applying them to the CMO tranches. B. purchasing power risk D. $325.00. CMO issues are more accessible to individual investors than regular pass-through certificatesD. General Obligation Bond A 5 year $1,000 par 3 1/2% Treasury Note is quoted at 101-4 - 101-8. Interest payments are still made pro-rata to all tranches, but principal repayments made earlier than that required to retire the PAC at its maturity are applied to the Companion class; while principal repayments made later than expected are applied to the PAC maturity before payments are made to the Companion class. A customer buys a $1,000 par Treasury Inflation Protection security with a 4% coupon and a 10 year maturity. II. a. T-bills are traded at a discount from par Each tranche has a different expected maturity, Each tranche has a different level of market risk (It is not a leap year). \end{array} It acts like a long-term zero-coupon bond, so it is most susceptible to interest rate risk. D. Treasury Stock, Which statements are TRUE when comparing Treasury Bills to Treasury STRIPS? C. series structures GNMA (Government National Mortgage Association) certificates, Treasury Bonds, and FNMA (Federal National Mortgage Association) bonds are all issued at par and make periodic interest payments. Thus, interest payments are made monthly. C. the same level of prepayment risk but a lower level of extension risk than a Planned Amortization Class If a customer buys 5 T-notes on Friday, April 4th in a regular way trade, how many days of accrued interest are owed to he seller? d. 97, Which of the following are TRUE statements regarding governments agencies and their obligations? CMO Targeted Amortization Classes (TACs) have: All of the following statements are true about "plain vanilla" CMO tranches EXCEPT: A. each tranche has a different maturity B. each tranche has a different yield C. each tranche has a different credit rating D. each tranche has a different level of interest rate risk. C. 15 year standard life Thus, the earlier tranches are retired first. \quad\quad\quad\textbf{Assets}\\ Private CMOs (Collateralized Mortgage Obligations) are also called "private label" CMOs. c. PAC tranche Ginnie Mae bonds are traded Over the Counter, The "modification" of Ginnie Mae modified pass through certificates is: D. the trade will settle next business day if performed "regular way", the yield to maturity will be higher than the current yield $4,914.06 If it is an agency CMO created by Ginnie Mae, the securities have the direct backing of the U.S. Government; if the agency CMO is created by Fannie Mae or Freddie Mac, it has the implied backing of the U.S. Government. A Targeted Amortization Class (TAC) is like a PAC, but is only buffered for prepayment risk by the Companion; it is not buffered for extension risk. $81.25 CMOs are available in $1,000 denominations, as opposed to pass-through certificates that are $25,000 denominations. There is little reinvestment risk with U.S. Government bonds because they are only callable in the last 5 years of their life. Interest income is accreted and taxed annually The spread is: A. I. B. the guarantee of the U.S. Government \begin{array}{lcc} 19-29 Cash Flows for GNMA IO and PO Accrued interest on the certificates is computed on a 30 day month / 360 day year basis, All of the following statements are true regarding GNMA "Pass Through" Certificates EXCEPT: IV. The CMO is rated AAA B. Freddie Mac is an issuer of mortgage backed pass-through certificates A. I. This is the discount earned over the life of the instrument. C. semi-annually The service limit is a quota set on a resource. If interest rates rise, homeowners will refinance their mortgages, increasing prepayment rates on CMOs STRIPS Losses are first absorbed by the most junior (lower) classes. when interest rates fall, prepayment rates rise, CMO "planned amortized classes" (PAC tranches): Thus, average life of the TAC is extended until the arrears is paid. These credit ratings agencies really did not understand the complex structure of CDOs and how risky their collateral was (sub-prime mortgage loans that were often no documentation liar loans). Ginnie Mae bonds are traded Over the Counter, Ginnie Mae is a U.S. Government Agency C. Treasury STRIP Equipment Trust Certificate c. CMOs are subject to a higher level of prepayment risk than a pass through certificate which statements are true about po tranches. A. GNMA Pass-Through Certificates. The process of separating the principal and interest on a debt obligation is known as stripping. C. certificates are issued in minimum units of $25,000 However, Interest Only tranche is quite different from a typical bond, simply because when market interest rate increases the rate of prepayment decreases, which in turn makes the rate of maturity to be longer. All of the following statements are true about PAC tranches EXCEPT: A. D. When interest rates rise, the interest rate on the tranche rises. III. B. quarterly A. The market has never recovered. Treasury Bond T-Bills are the most actively traded money market instrument, T-Bills can be purchased directly at weekly auction A. 0. which statements are true about po tranches CMO holders receive monthly payments derived from the underlying mortgage backed pass-through certificates. They are used to create tranches with different risk/return characteristics - so a CDO will have higher risk tranches holding lower quality collateral and lower risk tranches holding higher quality collateral. Principal repayments made earlier than expected are applied to the PAC prior to being applied to the Companion tranche B. mortgage backed securities created by a bank-issuer A floating rate CMO tranche has an interest rate that varies, tied to the movements of a recognized interest rate index, like LIBOR. Arrange the following CMO tranches from lowest to highest yield: II rated based on the credit quality of the underlying mortgages. These are funds payable at a registered clearing house, which are usually not good funds for three business days. This is true because prepayments on pass-through certificates are allocated pro-rata. &\textbf{Dec.31, 2013}&\textbf{Dec.31, 2014}&\textbf{Dec.31, 2015}\\\hline

Arthur John Beckinsale, Articles W