A three-class CMO has Class A,Class B,and Class C securities outstanding. Which class has the longest duration?

Question

Quizplus · Accepted Answer

Generally, the lower the credit quality of a security, the higher its duration, as investors demand a greater premium for holding riskier securities over a longer time period. Therefore, Class C securities, which typically have the lowest credit quality among the three classes in a CMO, would have the longest duration.

A Three-Class CMO Has Class A,Class B,and Class C Securities