Different types of ABS for the Committee’s consideration

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
2 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 bon

Sample Solution