SIE Exam Practice Question 225

Correct Answer: A

Explanation:

Pass-throughs provide investors with interest and principal payment income relative to their initial investments in pools of mortgages. The payments flow through to them on a monthly basis as the individual mortgages in the pools are paid down. A Separate Trading of Registered Interest and Principal of Securities (STRIP) is an investment that provides the opportunity to purchase separately either the principal or interest payment cash flow stream of a Treasury security. Collateralized mortgage obligations (CMOs) are similar to pass-throughs except that they are separated into different maturity schedules, or tranches, each being paid in full one at a time. Treasury inflation protected securities (TIPS) are securities whose interest payments and principal amounts are influenced by the level and movement of inflation.