The Distinguishing Feature of a Collateralized Mortgage Obligation, Compared with a Pass-Through

question 10

Multiple Choice

The distinguishing feature of a collateralized mortgage obligation, compared with a pass-through, is that:

• A) the collateral is other than mortgage loans.
• B) the cash flows are segmented and distributed to different classes of security holders.
• C) interest payments on all classes are withheld until maturity.
• D) all principal payments are discounted when issued.

---

Definitions:

Lockbox System

A service provided by banks to companies for the collection of payments from customers, involving the use of a special post office box.

Cash Conversion

The process by which a company turns its inventory or other current assets into cash, often measured through cycles or time periods.

Usable Cash

The portion of cash balances that is readily available for business operations or other immediate use, excluding reserved or allocated funds.

Target Cash Balance

The desired cash balance that a firm plans to maintain in order to conduct business.