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Which of the Following Is False for Collateralized Mortgage Obligations

Question 36

Multiple Choice

Which of the following is false for Collateralized Mortgage Obligations (CMOs) ?


A) CMOs are created from mortgage pass-through securities with more favorable characteristics than plain vanilla pass-throughs.
B) CMOs take a pool of mortgages and convert them into different maturities with different tranches for different investors preferences for maturities based on expected payments for a particular tranche.
C) CMOs allow investors to have less prepayment uncertainty than they would with an ordinary pass-through security.
D) A-class or first class tranche bonds are repaid their principal payments first, then B-class investor, and then C-class and so on with the A-class having the shortest maturity.
E) None of the above are false.

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