Why Are the Class C Bonds of a CMO Highly

question 78

Multiple Choice

Why are the class C bonds of a CMO highly attractive to insurance companies and pension funds?

• A)Because of their ability to offer perfect prepayment protection.
• B)Because of the shortest average life with a minimum of prepayment protection.
• C)Because of their long expected duration.
• D)Because they are basically zero coupon bonds and hence carry a minimum amount of risk.
• E)Because of their ability to offer perfect prepayment protection and because they are basically zero coupon bonds and hence carry a minimum amount of risk.

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