Z Class Is

question 53

Multiple Choice

Z class is:

• A)an accrual class of a CMO that makes a payment to bondholders only when preceding CMO classes have been retired
• B)the residual class of a CMO, giving the owner the right to any remaining collateral in the trust after all other bond classes have been retired plus any reinvestment income earned by the trust
• C)a bond that has some prepayment protection and expected durations of five to seven years depending on the level of interest rates
• D)a bond that has the shortest average life with a minimum of prepayment protection.They are, therefore, of no interest to investors seeking short-duration mortgage-backed assets

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Definitions:

Sharpe's Measure

A ratio used to evaluate the risk-adjusted return of an investment, comparing its excess return over the risk-free rate to its standard deviation of returns.

Risk-Free Return

The theoretical return attributed to an investment with zero risk, often associated with the return on government bonds.

Monarch Stock Fund

A hypothetical or specific mutual fund focusing on stocks, possibly structured around companies with substantial market influence or leadership.

Characteristic Line

In finance, it's a line generated in a scatterplot by regressing the returns of a security against the returns of the market, used to assess the security's sensitivity to market movements.