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Tranche Meaning & Definition

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Definition of Tranche

Tranche is a class of CMO that has a predicted maturity and interest rate.

Applying "Tranche" to Securities Exams:

Broker dealers will purchase pools of mortgages of all durations and use the pools of mortgages as collateral to create CMOs. Investors who wish to invest in the CMO will purchase a slice or a Tranche of the CMO that meets their objectives for interest rates and time to maturity.

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