A claim to the present value of the interest payments made by the mortgage holders in a GNMA pool is
A)a CARS.
B)an IO strip.
C)a CARD.
D)a PO strip.
E)a prepayment claim.

Question

Quizplus · Accepted Answer

An Interest-Only (IO) strip is a claim to the interest payments made by mortgage holders in a GNMA pool. It is a type of derivative security that separates the interest portion of the mortgage payments from the principal portion. A CARS (Collateralized Automatic Repayment Security) is a type of security that pays investors from the principal payments made by mortgage holders, while a CARD (Collateralized Amortizing Revolving Debt) is a type of security that combines the features of both principal and interest payments. A PO strip (Principal-Only Strip) is a type of derivative security that separates the principal portion of the mortgage payments from the interest portion. Prepayment claims are not related to interest payments.

A Claim to the Present Value of the Interest Payments