The longest-term tranche of a sequential-pay CMo is most likely to have the lowest:
A) average life.
B) extension risk.
C) contraction risk.

Name: The longest-term tranche of a sequential-pay CMo is most likely to have the lowest: A) average life. B) extension risk. C) contraction risk.
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Question

Quizplus · Accepted Answer

The longest-term tranche in a sequential-pay CMO structure is most likely to have the lowest contraction risk because it is the last to receive principal payments, reducing the likelihood of early repayment.

The Longest-Term Tranche of a Sequential-Pay CMo Is Most Likely