Which of the following is most likely an advantage of collateralized mortgage obligations (CMos)? CMos can
A) eliminate prepayment risk.
B) be created directly from a pool of mortgage loans.
C) meet the asset/liability requirements of institutional investors.

Question

Quizplus · Accepted Answer

Collateralized mortgage obligations (CMOs) can meet the asset/liability requirements of institutional investors, making them a potentially attractive option for these investors. While CMOs may offer some protection against prepayment risk, it is not a guarantee, and they are not created directly from a pool of mortgage loans but rather from Mortgage-Backed Securities (MBS).

Which of the Following Is Most Likely an Advantage of Collateralized