Question
A CMO is being issued with 2 tranches and a residual: - Tranche A has 6,000,000 in principal and a 4.50% coupon. - Tranche B
A CMO is being issued with 2 tranches and a residual: - Tranche A has 6,000,000 in principal and a 4.50% coupon. - Tranche B has 5,000,000 in principal and a 5.00% coupon. The mortgages backing the security issued are FRM at a mortgage rate of 5.10% with 10 year maturities and annual payments. There is no guarantee/servicer fee. Prepayment is assumed to be 5% CPR. The residual owns no principal at origination. In year 1, what is the cash flow to investors in Tranche B?
| 250,000.00 | ||
| 300,000.00 | ||
| 150,000.00 | ||
| 200,000.00 |
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Managerial Finance
Authors: John Fred Weston, Eugene F. Brigham, John Boyle, Robin John Limmack
1st Edition
0039101975, 978-0039101978
