Which One of the Following Statements Regarding PAC Bonds Is

question 38

Multiple Choice

Which one of the following statements regarding PAC bonds is correct?

• A)The cash flows from a PAC bond are less certain than those from a Z-tranche bond from a sequential CMO.
• B)PAC bondholders receive the residual cash flows from the underlying mortgage pool.
• C)PAC bonds are defined by specific rules that carve up cash flows from a mortgage pool.
• D)PAC bonds have bounds based on market interest rates.
• E)PAC bond cash flows are unaffected by mortgage prepayments.

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