easy · Asset-Backed Securities collateral

In a mortgage pool, 'extension risk' is most likely to result in which of the following changes to the 'principal window' of a sequential-pay bond?

1. The window starts earlier and is concentrated in fewer months.
2. The window starts later and lasts longer.
3. The window stays the same but the interest payments increase.
4. The window narrows toward the weighted average life.

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