Final answer:
The pass-through rate on a mortgage pass-through security is determined by the weighted average coupon rate of the underlying pool of mortgages.
Step-by-step explanation:
The pass-through rate on a mortgage pass-through security refers to the interest rate that the investor receives on the mortgage-backed security. It represents the weighted average coupon rate of the underlying pool of mortgages. The pass-through rate is determined by factors such as the interest rates on the underlying mortgages, the size of the mortgage pool, and the prepayment rates. If the weighted average coupon rate of the underlying pool is higher than the pass-through rate, it indicates that the investor is receiving a lower yield on their investment.