Planned amortization class (PAC)

Definition: [crh] (1) The class of CMO that has the most stable cash flows and the lowest prepayment Definition: HREF="/?rd=risk">risk of any class of CMO. Because of a stable cash flow, it is considered the least risky CMO. (2) A CMO bond class that stipulates cash flow contributions to a sinking fund. A PAC directs principal payments to the sinking fund on a priority basis in accordance with a predetermined payment schedule, with prior claimDefinition: to the cash flows before other CMO classes. Similarly, cash flows received by the trust in excess of the sinking fund requirementDefinition: are also allocated to other bond classes. The prepayment experience of the PAC is therefore very stable over a wide range of prepayment experience.

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