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Securitized Assets in Investment Portfol

Deliverable Length: 1-2 pages
Assignment Objectives:
Analyze and make recommendations on asset selection and allocation to meet client needs.
Calculate the impact of estate and other tax considerations to provide optimal financial outcomes.
As a financial adviser to individual investors, your boss has asked you to write a memo to him so that he can recommend a mortgage-backed bond to a client. The client has a particular corporate bond in mind, but your boss thinks that a pass-through mortgage-backed security would provide a better yield at the same risk level and maturity. The bond that the client is considering is a 7-year, AA-rated bond with a 6.75% coupon. When it matures, the proceeds will be used for and are matched exactly with the cost of his daughters college education, which will be paid in one lump sum. The bond your boss favors is a pass-through MBS (also 7-year with an AA rating), featuring a 7.15% coupon. Your economic research department just released a research report that predicts that interest rates are going to decline over the next several years to historical lows.
Write a memo to your boss of at least 300 words that provides the following:
Your recommendation
At least 3 reasons you considered to develop your recommendation
Shortly after you were given this task, you became aware of a new CMO issue that has an AA-rated, 7-year Class A VADM tranche, with a 7.00% coupon that uses a Z bond to protect against prepayment and extension risk. Write a second memo to your boss of at least 300 words that offers the following:
What the acronym VADM means in the context of MBS
A description of the new CMO tranche and how it may or may not be a better choice for the client than the corporate bond and the MBS that your boss initially recommended
Please submit your assignment.
Your assignment will be graded in accordance with the following criteria. Click the link below to view the grading rubric.
https://class.aiuniv.edu/LCMSFileSharePreview/Resources/MSWordDocument/FINA_IP_Rubric_Standard.docx
For assistance with your assignment, please use your text, Web resources, and all course materials.


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