A fall in interest rates is most likely to decrease the interest rate risk of a...

A fall in interest rates is most likely to decrease the interest rate risk of a ______. A. support tranche B. Z-tranche C. PAC tranche

Expert Solution

ANSWER

PAC TRANCHE

A fall in interest rates is most likely to decrease the interest rate risk of a PAC TRANCHE

A planned amortization class (PAC) tranche is a type of asset-backed security designed to protect investors from prepayment risk and extension .

jeff jeffy answered 2 years ago

17. When interest rates fall, a fixed interest rate mortgage lender will experience the following except...

17. When interest rates fall, a fixed interest rate mortgage lender will experience the following except Select one: a. the value of fixed mortgages will increase as a result of the fall in interest rate. b. the value of the fixed mortgages will decline as a result of the fall in interest rate. c. the mortgages may be repaid earlier and the lender may have to reinvest the proceeds at a much lower rare. d. a negative cash flow may...

If a corporate bond’s default risk increases, its credit spread will most likely: Decrease. remain unchanged....

If a corporate bond’s default risk increases, its credit spread will most likely: Decrease. remain unchanged. increase.

Which of the following statements regarding bond prices and market interest rates are most likely to...

Which of the following statements regarding bond prices and market interest rates are most likely to be true? 1. Interest rate risk can be described as the changes in market interest rates that will cause fluctuations in a bond’s price. 2. Bond prices and market interest rates are negatively related to each other. 3. Coupon paying bonds will trade at a premium to their face value because of the future cash flows expected by bond investors.

Investors who believe that interest rates will rise most likely prefer to invest in: A) inverse...

Investors who believe that interest rates will rise most likely prefer to invest in: A) inverse floaters B) fixed-rate bonds C) floating-rate notes.

Which of the following events would most likely explain a general increase in interest rates and...

Which of the following events would most likely explain a general increase in interest rates and a decrease in private investment in the loanable funds model, ceteris paribus? A. The U.S. federal government generates a surplus of $1 trillion and uses it to pay down the national debt. B. The U.S. federal government budget goes from deficit to surplus. C. The U.S. federal government reduces the tax rate on savings. D. The U.S. federal government budget deficit increases. _______________________________________________________________________________________________________________________________________________ 2....

Under flexible exchange rates, an expansionary monetary policy leads to a decrease in the interest rate,...

Under flexible exchange rates, an expansionary monetary policy leads to a decrease in the interest rate, and thus a depreciation of the exchange rate.’ Explain and critically evaluate this statement using IS-LM-IP and IS-MP-IP models.

Fully explain the effects on equilibrium output, interest rates, and the exchange rate from a decrease...

Fully explain the effects on equilibrium output, interest rates, and the exchange rate from a decrease in the domestic price level. (Include graphs)

If a bank has more rate-sensitive assets than liabilities, a fall in interest rates will reduce...

If a bank has more rate-sensitive assets than liabilities, a fall in interest rates will reduce bank profits, while a rise in interest rates will raise bank profits. Pl elaborate this statement. Thanks

INTEREST RATES= INFLATION PREMIUM + Compensation for risk free rate ( T Bill Rate ) of...

INTEREST RATES= INFLATION PREMIUM + Compensation for risk free rate ( T Bill Rate ) of return + specific risk premium compensation ( Default Risk, Liquidity Risk, Maturity Risk, Opportunity risk, etc). compare and contrast the various methods used by banks to assess interest rate risk to their net interest rate margin?

You have lent a floating rate loan to a borrower. Now, the interest rates are likely...

You have lent a floating rate loan to a borrower. Now, the interest rates are likely to decline. Which instrument could you use to protect yourself against a risk of declining interest rates? Select one: a. Reverse repo b. Short hedge in Futures c. Interest rate Cap d. Long hedge in Futures e. Repo

Question