If the prepayment schedule for a mortgage pool increases to 100 PSA from 50 PSA,the related interest-only strips will ________ in value and the related principal-only strips will ________ in value.

Question

Quizplus · Accepted Answer

Interest-only strips decrease in value with higher prepayments because they receive less interest over time. Principal-only strips increase in value with higher prepayments because they receive principal back sooner.

If the Prepayment Schedule for a Mortgage Pool Increases to 100