A Mortgage Pool Is Divided into a Basic Sequential CMO

question 91

Multiple Choice

A mortgage pool is divided into a basic sequential CMO structure that includes A-, B-, C-, and Z-tranches. Which tranche will initially be paid mortgage principal?

• A)A-tranche
• B)B-tranche
• C)C-tranche
• D)Z-tranche
• E)all tranches on a pro-rata basis

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Definitions:

Cash Flow

The gross amount of cash moving in and out of a commercial venture, significantly altering its liquidity status.

Net Cash Flow

Net cash flow is the measure of financial performance calculated as the difference between cash inflows and cash outflows over a period of time.

Debt/Equity Ratio

A financial tool that determines the equity-debt mix used in the procurement of company assets.

Short-Term Debt

Borrowings of a company due within a year, typically used for immediate operational needs or working capital.