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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 tranches. The A tranche will consist of $MM of principal and have a coupon of The B tranche will consist of $MM of principal and have a coupon of The Z tranche accrual tranche will consist of $MM of principal and have a coupon of The mortgages backing the security issued are FRM at with 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 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 ie How much will class A receive, how much will Class B receive, and how much will class Z receive from months
B What is the balance of the Class A tranche at the end of year
C What is the balance of the Class B tranche at the end of year
D What is the balance of the Class Z tranche at the end of year
Please back up with excel file showing formulas and explanations.
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