A PO Is a "Principal Only" MBS and an IO

Multiple Choice

A PO is a "principal only" MBS and an IO is an "interest only" MBS. As prepayments increase which of the following happens.

A) Both the PO and IO become more valuable
B) The PO becomes more valuable and the IO becomes less valuable
C) The PO becomes less valuable and the IO becomes more valuable
D) Both the PO and IO become less valuable