26-85 Which of these CMO issues has characteristics of both a zero-coupon bond and a regular bond?
A)Class A bonds.
B)Class B bonds.
C)Class C bonds.
D)Class Z bonds.
E)None of the above.

Question

Quizplus · Accepted Answer

Class Z bonds have characteristics of both a zero-coupon bond, which means that they do not pay periodic interest payments but are sold at a discount and pay the full face value at maturity, and a regular bond, which pays periodic interest payments and repays the face value at maturity. Class Z bonds do not pay periodic interest, but they may be sold at a premium or discount and they repay the full face value at maturity.

26-85 Which of These CMO Issues Has Characteristics of Both