An investor purchases $1 million of a mortgagebacked security. The periodic interest amount received on a mortgagebacked security:
A) Increases over time
B) Decreases over time
C) Remains constant
D) Cant remember
I was under the impression that the actual payment received from the MBS would be fixed, even though the makeup of that payment changes in terms of % made up of principal and % made up of interest. The answer is B. Is that just because of prepayment? |