Posted: March 20th, 2017

Asset and debt management class

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 

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