In a three-class sequential pay CMO,if we consider Class B holders as having average prepayment risk,then Class A holders have ________ prepayment risk and Class C holders have ________ prepayment risk.

Question

Quizplus · Accepted Answer

Class A holders have below average prepayment risk because they are first in line to receive payments, so they are less likely to prepay. Class C holders have above average prepayment risk because they are last in line to receive payments, so they are more likely to prepay.

In a Three-Class Sequential Pay CMO,if We Consider Class B