The Sum of the Market Values of All the Classes

question 45

Multiple Choice

The sum of the market values of all the classes of a CMO is greater than the total value of the GNMA pass-throughs backing the CMO because

• A)the CMO has less credit risk than the pass-through.
• B)CMO investors can choose their degree of prepayment protection.
• C)the government guarantees CMOs' performance.
• D)CMOs have a more favorable tax status than pass-throughs.
• E)CMO investors have no prepayment risk.

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Definitions:

Permanent Accounts

Accounts that carry their balances over into the next accounting period, such as assets, liabilities, and equity accounts.

End-of-period Spreadsheet

A tool used in accounting to compile all financial information before closing the books at the end of a reporting period.

Spreadsheet Heading

The title section at the top of a spreadsheet document that typically contains the name of the spreadsheet, columns, rows, or specific data identifiers.

Adjusted Trial Balance

A statement showing all balances of ledger accounts after adjustments, used to prepare financial statements.