Which of the Below Statements Is FALSE

Multiple Choice

Which of the below statements is FALSE?

A) In 1987, CMO issuers began issuing bonds with the characteristic that if prepayments are within a specified range, the cash flow pattern is known. The greater predictability of the cash flow for these classes of bonds, referred to as planned amortization class (PAC) bonds, occurs because there is a principal repayment schedule that must be satisfied.
B) PAC bondholders have priority over all other classes in the CMO issue in receiving principal payments from the underlying collateral.
C) The greater certainty of the cash flow for the non-PAC bonds comes at the expense of the PAC classes, called the support bonds or companion bonds. It is these bonds that absorb the prepayment risk.
D) Because PAC bonds have protection against both extension risk and contraction risk, they are said to provide two-sided prepayment protection.