1.
2-pages
References
As a finance employee in a municipality, you have been
informed that a separate $85 million pension fund for the
municipality’s firefighters will be carved out of the
municipality’s pension fund. The newly formed Firefighter’s
Pension Investment Committee is interested in investing up to
$25 million of pension assets in asset-backed securities to
mature in 10 years so that they can be disbursed to a fund for
payment to retired firefighters. Your task is to make a
presentation of 600–800 words to the committee explaining the
different types of ABS for the committee's consideration. The
presentation must include the following:
A discussion of at least 3 important types of ABS, including
MBS
Two specific, real-world examples of asset-backed securities
with appropriate maturities and how they compare to a Treasury
security of the same maturity in terms of the spread over the
Treasury yield
A discussion of the third risk that exists for MBS investors in
addition to the credit and interest rate risks faced by all
bondholders, as well as which kind of MBS would be the most
appropriate for the pension fund given its 10-year horizon for
disbursing funds
At least 2 outside sources