hard · Asset-Backed Securities
A residential mortgage pool is priced at 102.50 (premium). If the prepayment speed accelerates from 10% CPR to 25% CPR, what is the primary impact on the investor's yield?
- Yield remains stable due to yield maintenance protections.
- Yield decreases because the premium is amortized over a shorter period.
- Yield increases because the investor receives principal back faster.
- Yield decreases because the duration of the bond extends.
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