Suppose that you have invested in a principal-only CMO with an expected life of 8 years. What likely will happen to the duration of your security if mortgage interest rates decrease by 2%? The duration will increase The duration will decrease The duration won't change, because the security is guaranteed by the U.S. government Not enough information

Suppose that you have invested in a principal-only CMO with an expected life of 8 years. What likely will happen to the duration of your security if mortgage interest rates decrease by 2%? The duration will increase The duration will decrease The duration won't change, because the security is guaranteed by the U.S. government Not enough information

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter27: Multinational Financial Management

Section: Chapter Questions

Problem 7MC

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Question

Suppose that you have invested in a principal-only CMO with an expected life of 8 years. What likely will happen to the duration of your security if mortgage interest rates decrease by 2%?

The duration will increase

The duration will decrease

The duration won't change, because the security is guaranteed by the U.S. government

Not enough information

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