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Z-Tranche
Often the last tranche in a CMO, the Z-tranche
receives no cash payments for an extended period of time until the previous
tranches are retired. While the other tranches are outstanding, the Z-tranche
receives credit for periodic interest payments that increase its face value
but are not paid out. When the other tranches are retired, the Z-tranche
begins to receive cash payments that include both principal and continuing
interest. |
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