(Answered) As the cro of a firm specializing in mbss you have been

Finance

As the CRO of a firm specializing in MBSs, you have been asked to explain how interest-only (IO) strips and principal-only (PO) strips would react if interest rates change. Which of the following is true?

A. When interest rates fall, both PO and IO strips will increase in value.

B. When interest rates fall, POs will increase in value, IOs decrease in value.

C. When interest rates rise, POs will increase in value, IOs decrease in value.

D. When interest rates rise, both PO and IO strips will increase in value.

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