In a CMO,the buyers of different tiers (or tranches)of securities face the same degree of prepayment risk.

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In a CMO, buyers of different tiers (or tranches) of securities face different degrees of prepayment risk. The structure of a CMO allows for the cash flows from the underlying mortgages to be divided among different tranches with different levels of risk and return. The higher tranches generally have lower prepayment risk, while the lower tranches have higher prepayment risk.

In a CMO,the Buyers of Different Tiers (Or Tranches)of Securities