The following questions are to be answered by referring to the prospectus supple- ment that appears on pages 291-316. As indicated on pages of the prospectus (pp. 314-315), the structure and the distribution payments are based on mortgage loans with a 12% mortgage rate and an initial mortgage term of 360 months, and the underlying pass-throughs as having a coupon rate of 10.125% and a remaining term to maturity of 356 months.

a. How many classes are there in this CMO structure?

b. (1) Which class is the floating-rate class? (2) What benchmark interest rate is used for the floating-rate, and what is the spread to the benchmark? (3) What are the cap and the floor on the floating rate after August 24, 1990? How is the floor determined?

c. (1) Which class is the inverse-floating-rate class? (2) What formula is used to determine the coupon rate for the inverse floater? (3) What is the coupon leverage? (4) What are the cap and the floor on the inverse floater after August 24, 1990? (5) How was the cap on the inverse floater determined? (6) How was the cap on the floating-rate class determined?

d. Assuming the initial principal outstanding of both the floating-rate and in- verse-floating-rate classes and LIBOR of 9%: (1) What dollar coupon interest will be paid to the floating-rate class? (2) What dollar coupon interest will be paid to the inverse floater? (3) What is the total dollar coupon interest to both classes? (4) What is the total dollar coupon interest on the underlying pass-through as- suming a coupon rate of 10.125%?

e. Based on your answer to part

(d) what is the weighted-average coupon paid to the sum of the floating- and inverse-floating-rate classes?

f. Are the floating-rate and inverse-floating-rate classes in this structure PAC or support classes? g. (1) How many PAC bonds are in this CMO structure? (2) What is the initial PAC collar?

h. Based on the planned principal balances shown on pages S-16 to S-24: (1) When is Class 89-A scheduled to make its first principal payment? (2) When is Class 89-A scheduled to make its final principal payment? (3) What is the window for Class 89-A? (4) When is Class 89-G scheduled to make its first principal payment? (5) When is Class 89-G scheduled to make its final principal payment? (6) What is the window for Class 89-G? i. Which bond is an accrual PAC bond? How did you determine which PAC bond was an accrual PAC bond? j. What are the support bonds in this CMO structure? k. Based on the percent of original principal balance outstanding reported on pages S-30 to S-34: (1) To what extent is Class 89-A subject to extension risk? (2) To what extent is Class 89-B subject to contraction risk? (3) Explain why the support classes are subject to substantial prepayment risk.

(4) For the PAC bonds, why is the weighted-average life constant between 90% PSA and 275% PSA?AppendixLO1