CMOs are divided into tranches, which are portions of the pool of mortgage-backed securities. Each tranche has its own characteristics, including coupon rate, maturity date, and credit rating, tailored to meet the needs of different investors.
* C is correctbecause tranches represent slices of the investment with specific terms.
* Ais incorrect because the yield depends on prepayment rates and interest rate changes.
* Bis incorrect as average life is an estimate, not a defining characteristic of a tranche.
* Dis incorrect because underwriting is unrelated to the definition of a tranche.