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Question:

Which of the following mortgage-backed securities is most likely to feature credit tranching?

A Commercial mortgage-backed securities.
explanation

Commercial mortgage-backed securities often feature credit tranching in which subordinated tranches are the first to absorb credit losses. Sequential-pay CMOs employ time tranching in which all principal payments flow to Tranche 1 up to its principal amount, then to Tranche 2 up to its principal amount, and so on. Agency RMBS are pass-through securities and do not feature credit tranching or time tranching.

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