An Investor in a First-Level CMO Tranche with Claims on a Pool

question 42

Multiple Choice

An investor in a first-level CMO tranche with claims on a pool of mortgages is likely to

• A) have a much higher risk position than lower level tranches.
• B) have more certain returns and less default-risk exposure.
• C) wait until all tranches are paid before receiving a return.
• D) have lower risk but a much more varied return than lower level tranches.