Cryptocurrency Q&A
How do PAC bonds work?
How do PAC bonds work?
Martina
Sat Nov 09 2024
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7 answers
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PAC bonds, or Planned Amortization Class collateralized mortgage obligations, provide a set average life within specific prepayment assumptions. They are structured to offer stability in average life variability, making them attractive to institutional investors seeking better asset and liability matching. PAC bonds work by having a fixed principal repayment schedule that must be met, ensuring predictability in cash flows.
7 answers
GeishaWhisper
Mon Nov 11 2024
This allocation is done on a priority basis, ensuring that the sinking fund receives funds before other CMO classes.
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Silvia
Mon Nov 11 2024
The PAC has a predetermined order of claims on the cash flows received by the trust.
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Martina
Mon Nov 11 2024
The sinking fund has a prior claim to these cash flows, meaning it is entitled to receive funds before any other bond classes.
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Martino
Mon Nov 11 2024
A PAC operates by allocating principal payments to a sinking fund based on a predefined payment schedule.
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Andrea
Mon Nov 11 2024
In cases where the trust receives cash flows that exceed the sinking fund requirement, these excess funds are not left idle.
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