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If the expected default rate on a particular mortgage backed security is 4 % per

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Question;1. If the expected default rate on a particular mortgage backed security is 4 % per year, and the corresponding Treasury security carries a 3% annual interest rate, what should be the interest rate on the mortgage backed security? What happens if the expected default rate rises to 8%?

 

Paper#57347 | Written in 18-Jul-2015

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