Early Maturing Tranches vs Risk

[rahul.goyl]

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