Which of the following is referred to as a sequential-pay CMO? A sequential-pay CMO is structured so that each class of bond: A. is retired sequentially. B. receives prepayments on a sequential pro-rata basis. C. has different credit risk.
When there are prepayments, the principal in the first bond class (tranche) is reduced until it is fully retired, then the principal of the next bond class is retired, and so on.
