求讲解

问题如下：

The longest-term tranche of a sequential-pay CMO is most likely to have the lowest:

选项：

A.

average life

B.

extension risk

C.

contraction risk

解释：

Correct Answer: C

For a CMO with multiple sequential-pay tranches, the longest-term tranche will have the lowest contraction (prepayments greater than forecasted) risk because of the protection against this risk offered by the other tranches. The longest-term tranche is likely to have the highest average life and extension risk because it is the last tranche repaid in a sequential-pay tranche.