An investor wishes to purchase a collateralized mortgage obligation (CMO), but is concerned about the potential for
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Question:
An investor wishes to purchase a collateralized mortgage obligation (CMO), but is concerned about the potential for unpredictable cash flows and swings in the average life of the investment. Which tranche in a CMO structure would be most suitable for this investor, providing the most predictable cash flows and average life?
A)a later-paying tranche (C or D) in a sequential pay structure
B)a planned amortization class (PAC) tranche
C)a support tranche in a planned amortization class (PAC) structure
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