____________________are securitizations that direct the cash flow of mortgage-related products to various classes of bondholders thus creating financial instruments with varying prepayment risks and varying returns.
A)Mortgage-backed securities
B)Asset-backed securities
C)Collateralized mortgage obligations
D)Derivatives

Question

Quizplus · Accepted Answer

Collateralized mortgage obligations (CMOs) create separate classes of bondholders with different maturities and varying prepayment risks. This allows investors to choose the risk and return level they are comfortable with. Mortgage-backed securities (MBS) and asset-backed securities (ABS) are other types of securitizations, but they do not have the same level of risk differentiation as CMOs. Derivatives are financial instruments whose value is derived from an underlying asset or security, but they are not a type of securitization.

____________________Are Securitizations That Direct the Cash Flow of Mortgage-Related Products