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Planned amortization class

• Is a security which is structured to have a reasonable life expectancy provided the prepayment speeds stay within the defined ranges. The scheduled interest and principal payments tend to be more stable for these tranches relative to the other parts of the deal.

• CMO (1) One class of CMO that carries the most stable cash flows and the lowest prepayment risk of any class of CMO. Because of that stable cash flow, it is considered the least risky CMO. (2) A CMO bond class that stipulates cash-flow contributions to a sinking fund. With the PAC, principal payments are directed to the sinking fund on a priority basis in accordance with a predetermined payment schedule, with prior claim to the cash flows before other CMO classes. Similarly, cash flows received by the trust in excess of the sinking fund requirement are also allocated to other bond classes. The prepayment experience of the PAC is therefore very stable over a wide range of prepayment experience.

 
 Embedded terms in definition
 Basis
Bond
Cash flow
Cash
Class
Cmo
Interest
Life expectancy
Pac
Prepayment risk
Prepayment speed
Prepayment
Principal
Range
Risk
Security
Sinking fund requirement
Sinking fund
 
 Related Terms
 Amortization
Amortization factor
Class
Earnings before interest, taxes, depreciation, and amortization
Interest impact on instalment to amortize or amortization
Loan amortization
Loan amortization schedule
Negative amortization
Planned capital expenditure program
Planned financing program
Targeted amortization class

<< Plan sponsors Planned capital expenditure program >>

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