Which one of the following statements regarding PAC bonds is correct?
A) The cash flows from a PAC bond are less certain than those from a Z-tranche bond from a sequential CMO.
B) PAC bondholders receive the residual cash flows from the underlying mortgage pool.
C) PAC bonds are defined by specific rules that carve up cash flows from a mortgage pool.
D) PAC bonds have bounds based on market interest rates.
E) PAC bond cash flows are unaffected by mortgage prepayments.
Correct Answer:
Verified
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