Question
A CMO has 3 tranches, A, B, and Z (an accrual tranche), as well as a residual class. If the prepayment on the pool of
A CMO has 3 tranches, A, B, and Z (an accrual tranche), as well as a residual class. If the prepayment on the pool of mortgages that supports the CMO decreases from CPR 10% to CPR 5% when doing projected cashflows, what would happen to the expected maturity of the Z class?
Stay the same
Decrease
Increase
Can't be determined
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Investment Analysis and Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown
10th Edition
538482109, 1133711774, 538482389, 9780538482103, 9781133711773, 978-0538482387
