UNIT 1 ASSIGNMENT
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
ate 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