Which of the Below Statements Is FALSE

question 37

Multiple Choice

Which of the below statements is FALSE?

• A) In 1987, CMO issuers began issuing bonds with the characteristic that if prepayments are within a specified range, the cash flow pattern is known. The greater predictability of the cash flow for these classes of bonds, referred to as planned amortization class (PAC) bonds, occurs because there is a principal repayment schedule that must be satisfied.
• B) PAC bondholders have priority over all other classes in the CMO issue in receiving principal payments from the underlying collateral.
• C) The greater certainty of the cash flow for the non-PAC bonds comes at the expense of the PAC classes, called the support bonds or companion bonds. It is these bonds that absorb the prepayment risk.
• D) Because PAC bonds have protection against both extension risk and contraction risk, they are said to provide two-sided prepayment protection.

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Definitions:

Language Learning

The process through which individuals acquire the ability to perceive, comprehend, and produce language.

Developmental Milestones

Specific functional and physical abilities that most children achieve by a certain age, used as indicators of typical child development.

Vocabulary

The set of words known and used by a person in speech and writing.

Private Speech

Verbal communication directed at the self, typical in early childhood, and used for self-guidance and regulation.