Which of the following is NOT true of an R class CMO issue?
A)It is treated as "garbage class."
B)It is a high-risk investment class.
C)It gives the investor the rights to the over-collateralization and reinvestment income on the cash flows in the CMO trust.
D)Returns increase when interest rates increase.
E)It has a positive duration.

Question

Quizplus · Accepted Answer

An R class CMO issue typically has a negative duration, meaning its value increases when interest rates rise, contrary to the statement in option E.

Which of the Following Is NOT True of an R