The creation and sale of CMOs is based, at least in part, on the ability to segment the market for pass-through security products.

Question

Quizplus · Accepted Answer

CMOs are created by dividing mortgage pools into segments based on different characteristics such as prepayment risk and interest rate sensitivity. These segments are then sold as separate securities to different investors, allowing them to choose the investment product that best suits their needs. This segmentation of the market is a key factor in the creation and sale of CMOs.

The Creation and Sale of CMOs Is Based, at Least