Course 203: Collateralized Mortgage Obligations
Are They For You?
In this course
1 Introduction
2 What Are Collateralized Mortgage Obligations?
3 Companion Bonds and PACs
4 Strategic Considerations for Collateralized Mortgage Obligations
5 Are They For You?

Collateralized mortgage obligations are bonds based on pools of home mortgages arranged to minimize the impact of loan prepayments on investment returns. Special classes of CMO bonds, such as companion bonds and PACs, either increase or decrease the prepayment risk--and the risk premium--for investors. While CMO bonds tend to pay lower yields than other pass-through securities, they still tend to outperform other kinds of low-risk debt securities such as U.S. Treasury bonds.

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