A CMO is being issued with 3 tranches. The A tranche will consist of $40.5M of principal and have a coupon of 8.25%. The B tranche will have a coupon of 9% and a principal of $22.5M. The Z tranche will carry a coupon of 10% with a principal of $45M. The mortgages backing the security issued are FRM at 10% with 10 year maturities and annual payments (for simplicity). The issue will be overcollateralized by $4.5M and the issuer (residual) will receive cash flows after payment rules to other classes are satisfied.

Please, enter the answers to thelowing quastions, given the information in this question. This is the problam I went ovar in class. All the following quastions consist of calculations to complata the cash flow of tranche A Please answer this question as true if you understood the question. A CMO s being issued with 3 tranches The A tranche will consist of $40 5M of principal and have a coupon of a 25% The B tranche wil have a coupon o 9% and a principal of$22 5M The Z anch wil carry a coupon of 10% with a p nClpal of$45M The mortgages backing he security issued ere FRM et 0% with 0 year m at rities and annual payments or simplid ). The ssue will be overco lateralized by $4.5M and the ss er ead a rece ve cas o s e er pe mentr es o ot er c esses are as sned Priority payments will be made to the A tranche and the A class will be first to receive their promised coupon payment. The B class will receive interest payments only until the A class is repaid. In addition to interest, A will receive priority payments toward principsl in the a mou rof orponc oa apayment by po and he i nes accu to in that pen d After A s repaid. B then wil ece ve priority payments o am o zation and acc ued interest according a same les as A The Z dass wil accrue interest at 10% un i both A and B are repaid. It will receive cument interest and principal payments at that time according to the same rules as A and B. All cash flowws from the pool that are not designated by the above rules will go to the residual class in that period Year B B ayment InterestPrincipal End Bal 1250.0 2 105,441.14 10,300.06 10,544.1 7,764.74 97,676.40 97,576.40 10,300.06 9,76764 0,541.22 09135.18 79.739.85 79,739.85 18,308.86 7,973 98 10,334.87 69404.97 58.036.61 58,035.61 18,308.86 5,803 56 12,505.20 45,531.42 5,531.42 18,308.86 4,553 14 13,755.7231,775.TO 1,775.O 18,308.86 3,1775,13129 16,644.42 0.00 89,135.18 18,306.86 8,91352 9,395.34 59.404.87 18,306.86 6,940 50 1,368.36 16 644.4 18,308 88 1,664 44 6,644 42 Tranche A Interest 40,500 3,341 11,559 28,941 Please, enter the answers to thelowing quastions, given the information in this question. This is the problam I went ovar in class. All the following quastions consist of calculations to complata the cash flow of tranche A Please answer this question as true if you understood the question. A CMO s being issued with 3 tranches The A tranche will consist of $40 5M of principal and have a coupon of a 25% The B tranche wil have a coupon o 9% and a principal of$22 5M The Z anch wil carry a coupon of 10% with a p nClpal of$45M The mortgages backing he security issued ere FRM et 0% with 0 year m at rities and annual payments or simplid ). The ssue will be overco lateralized by $4.5M and the ss er ead a rece ve cas o s e er pe mentr es o ot er c esses are as sned Priority payments will be made to the A tranche and the A class will be first to receive their promised coupon payment. The B class will receive interest payments only until the A class is repaid. In addition to interest, A will receive priority payments toward principsl in the a mou rof orponc oa apayment by po and he i nes accu to in that pen d After A s repaid. B then wil ece ve priority payments o am o zation and acc ued interest according a same les as A The Z dass wil accrue interest at 10% un i both A and B are repaid. It will receive cument interest and principal payments at that time according to the same rules as A and B. All cash flowws from the pool that are not designated by the above rules will go to the residual class in that period Year B B ayment InterestPrincipal End Bal 1250.0 2 105,441.14 10,300.06 10,544.1 7,764.74 97,676.40 97,576.40 10,300.06 9,76764 0,541.22 09135.18 79.739.85 79,739.85 18,308.86 7,973 98 10,334.87 69404.97 58.036.61 58,035.61 18,308.86 5,803 56 12,505.20 45,531.42 5,531.42 18,308.86 4,553 14 13,755.7231,775.TO 1,775.O 18,308.86 3,1775,13129 16,644.42 0.00 89,135.18 18,306.86 8,91352 9,395.34 59.404.87 18,306.86 6,940 50 1,368.36 16 644.4 18,308 88 1,664 44 6,644 42 Tranche A Interest 40,500 3,341 11,559 28,941