SIE practice questionmediumCMOs
Which feature distinguishes CMOs from traditional mortgage-backed securities?
- ADifferent tranches with various maturities and payment priorities✓ Correct answer
- BPayments only at maturity
- COnly government-backed mortgages included
- DNo prepayment risk
Explanation
Why A — Different tranches with various maturities and payment priorities
CMOs structure cash flows into tranches with different maturities and payment priorities. Payments, prepayment risk, and asset types may vary.
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