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Early Maturing Tranches vs Risk

Hi David,

Can you plz explain why B is correct.

Which of the following statements regarding CMOs is FALSE? The:
A)early maturing tranches offer relatively greater protection against extension risk.
B)early maturing tranches offer relatively greater protection against contraction risk.
C)longer-term tranches offer relatively greater protection against contraction risk.
D)principal pay down window refers to the number of months that it takes for a given tranche to be fully amortized.
Your answer: A was incorrect. The correct answer was B)

Regards,
Rahul
 
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