CFA Practice Question

CFA Practice Question

Which of the following is incorrect?
A. CMOs are derivative securities of MBS, and are designed to reduce prepayment risk by breaking up the cash flow into tranches.
B. All CMO tranches have equal risk.
C. Once an MTN has been approved by the SEC, the corporation can sell the bonds whenever they wish.
Explanation: CMO tranches have different risks depending upon the order in which they get repaid.

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