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NEW QUESTION: 3
Kylie Autumn, CFA, is a consultant with Tri-Vision Group. Robert Lullum, Senior Vice President ai Langsford Investments, has asked for assistance with the evaluation of mortgage-backed and collateralized mortgage obligation (CMO) derivative securities for potential inclusion in several client portfolios. Langsford Investments mainly deals with equity investments and REITs, but the company recently purchased a small firm that invests mainly in fixed-income securities.
Lullum has done some research on the appropriate spread measures and option valuation models for fixed-income securities and wants to clarify some points. He wants to know if the following statements are correct:
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Statement 2: Callable corporate bonds and mortgage-backed securities should be measured using the option-added spread.
Statement 3: The Z-spread is appropriate for credit card ABS and auto loan ABS.
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A. The sudden $2 increase would have a small effect.
B. The sudden $2 increase would have a large effect.
C. The original MCPPS is $60 per share.
Answer: A
Explanation:
Explanation/Reference:
Explanation:
The MCPPS is the difference between the conversion value and the bond's current market price, on a per share basis.
Regarding the stock price increase, the
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