Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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What is a CMO?
Expert Solution
Step 1 DEFINATION
A collateralize mortgage obligation (CMO) refers to a type of mortgage-backed security that contains a pool of mortgages bundled together and sold as an investment. Organized by maturity and level of risk, CMO's receive cash flows as borrowers repay the mortgages that act as collateral on these securities. In turn, CMO's distribute principal and interest payments to their investors based on predetermined rules and agreements.
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