A mortgage pool is divided into a basic sequential CMO structure that includes A-, B-, C-, and Z-tranches. Which tranche will have the longest life?

Question

Quizplus · Accepted Answer

The Z-tranche, also known as the accrual tranche, will have the longest life as it receives interest payments after all other tranches have been paid off. This means that it will continue to receive cash flows until the underlying mortgages have been paid off in full. The A-, B-, and C-tranches have shorter lives as they are paid off in sequential order.

A Mortgage Pool Is Divided into a Basic Sequential CMO