In early 1987, stripped mortgage-backed securities began to be issued allocating all the interest to one class [called the ________ class] and the entire principal to the other class [called the ________ class].

Question

Quizplus · Accepted Answer

The correct terms for the classes described in the question are "principal-only" (PO) class and "interest-only" (IO) class. Therefore, the correct choice is C. Choice A refers to the inverse of what is being described, and choice B includes a term ("prepayment-only") that is not mentioned in the question. Choice D uses terms that do not accurately describe the classes being referred to.

In Early 1987, Stripped Mortgage-Backed Securities Began to Be Issued