7) Consider a sequential pay CMO that is backed by 60 mortgages with average balance of $100,000 each. The mortgages have monthly payments with WAM = 15 years and WAC = 8%. There is a servicing fee of 0.3% and prepayment is according to 100% PSA. There are two tranches in this CMO: tranche A issued for $4,000,000 and tranche B issued the rest of the amount. How much cash flow do investors in tranche A receive in the first month?

7b)Using the same CMO as in Question 7 and suppose that in month 10, the beginning balance on tranche A is $3,795,675 and the beginning balance on tranche B is $2,000,000. How much cash flow do investors in tranche A receive in month 10?

8. Consider a sequential pay CMO that is backed by 150 mortgages with average balance of $100,000 each. The mortgages have monthly payments with WAM = 15 years and WAC = 5%. There is a servicing fee of 0.6% and prepayment is according to 150% PSA. There are two tranches in this CMO: tranche A issued for $4,000,000 and tranche B issued for $11,000,000. How much cash flow do investors in tranche A receive in the first month?

b) Consider the same CMO as in Question 8. How much is starting balance for tranche A investors in month 2?

c) Consider the same CMO as in Question 8. How much is the cash flow to investors in tranche B receive in month 2?