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A CMO is being issued with 3 tranches. The A tranche will consist of $ 5 0 MM of principal and have a coupon of

A CMO is being issued with 3 tranches. The A tranche will consist of $50MM of principal and have a coupon of 7%. The B tranche will consist of $30MM of principal and have a coupon of 7%. The Z tranche (accrual tranche) will consist of $20MM of principal and have a coupon of 7%. The mortgages backing the security issued are FRM at 7% with 30 year maturities and monthly payments.
Priority payments will be made to the A tranche and will include the promised coupon. Interest will be accrued to the Z tranche until A is completely repaid. The B class will receive interest payments only until the A class is repaid. The A class will then receive all remaining CFs from the pool that year. After A is repaid, B will receive priority principal payments. The Z class will accrue interest at 7% until both A and B are repaid. It will receive current interest and principal payments at that time.
Assume there is no prepayment and no servicing fees.
A) Given the information presented above, what is the total cash flow to each class of investors in year 2(i.e. How much will class A receive, how much will Class B receive, and how much will class Z receive from months 13-24)?
B) What is the balance of the Class A tranche at the end of year 5?
C) What is the balance of the Class B tranche at the end of year 5?
D) What is the balance of the Class Z tranche at the end of year 6?
Please back up with excel file showing formulas and explanations.

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