In Comparison to Other Mortgage-Backed Securities,the Unique Characteristic of CMOs

question 28

Multiple Choice

In comparison to other mortgage-backed securities,the unique characteristic of CMOs is that:

• A)CMO issuers do not retain ownership of the underlying mortgage pool
• B)CMOs are issued in multiple security classes
• C)The CMO mortgage pool is not overcollateralized
• D)CMOs are a pay-through in which all amortization and prepayments flow through to investors

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Definitions:

Accrued Income Taxes

Taxes that have been incurred, but not yet paid, usually recognized at the end of an accounting period.

Operating Activity

Activities that are part of the day-to-day operations of a business, such as selling, general, and administrative expenses.

Treasury Stock

Shares that were issued and later reacquired by the issuing company.

Depreciation Expense

The distribution of a physical asset's cost across its life of utility.