Help
Course Catalog > Bonds > 200
Bonds 203: Collateralized Mortgage Obligations

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Which of the following is an investment benefit of collateralized mortgage obligations?
Choose wisely. There is only one correct answer.
Higher potential than that of US Treasury bonds. The other features are not characteristic of CMO bonds.
2.
Compared to other pass-throughs, collateralized mortgage obligations offer higher returns and lower risk.
Choose wisely. There is only one correct answer.
False. While CMOs do offer lower prepayment risk than other pass-throughs, their returns are often lower as a result.
3.
__________ feature lower prepayment risk and offer lower returns.
Choose wisely. There is only one correct answer.
PACs. These bonds feature sinking funds that lower the risk that prepayments will affect returns and pay lower interest as a result.
4.
Income from a CMO mortgage pool is applied to the latest-maturing bonds first.
Choose wisely. There is only one correct answer.
False. Income from a CMO mortgage pool is applied to the earliest-maturing bonds first.
5.
Collateralized mortgage obligations are issued by Ginnie Mae.
Choose wisely. There is only one correct answer.
False. CMOs are issued by the Federal Home Loan Corporation (FHLMC), or Freddie Mac.