Which of the following is False? In comparison to mortgage pass-though securitie
ID: 2798633 • Letter: W
Question
Which of the following is False?
In comparison to mortgage pass-though securities, CMOs attract a broader class of investors because, by prioritizing cash flows, they can offer more specific maturities.
One way in which a mortgage pay-through bond (MPTB) is similar to a mortgage-backed bond (MBB) is that the pay-through bond is a debt obligation of the issuer.
Investors retain prepayment risk on MBBs, but issuers incur this risk with MPTs.
From the issuer’s perspective, the use of MBBs and MPTBs should be viewed as a method of debt financing.
a.In comparison to mortgage pass-though securities, CMOs attract a broader class of investors because, by prioritizing cash flows, they can offer more specific maturities.
b.One way in which a mortgage pay-through bond (MPTB) is similar to a mortgage-backed bond (MBB) is that the pay-through bond is a debt obligation of the issuer.
c.Investors retain prepayment risk on MBBs, but issuers incur this risk with MPTs.
d.From the issuer’s perspective, the use of MBBs and MPTBs should be viewed as a method of debt financing.
Explanation / Answer
Ans C is False
In comparison to mortgage pass-though securities, CMOs attract a broader class of investors because, by prioritizing cash flows, they can offer more specific maturities. TRUE
One way in which a mortgage pay-through bond (MPTB) is similar to a mortgage-backed bond (MBB) is that the pay-through bond is a debt obligation of the issuer. TRUE
Investors retain prepayment risk on MBBs, but issuers incur this risk with MPTs. FALSE
From the issuer’s perspective, the use of MBBs and MPTBs should be viewed as a method of debt financing.TRUE
a.In comparison to mortgage pass-though securities, CMOs attract a broader class of investors because, by prioritizing cash flows, they can offer more specific maturities. TRUE
b.One way in which a mortgage pay-through bond (MPTB) is similar to a mortgage-backed bond (MBB) is that the pay-through bond is a debt obligation of the issuer. TRUE
c.Investors retain prepayment risk on MBBs, but issuers incur this risk with MPTs. FALSE
d.From the issuer’s perspective, the use of MBBs and MPTBs should be viewed as a method of debt financing.TRUE
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