Question
A mortgage company is issuing a CMO with three tranches, with the principal and coupon rate based on the relative risk levels of each respective
A mortgage company is issuing a CMO with three tranches, with the principal and coupon rate based on the relative risk levels of each respective tranche. The mortgages backing the security issue were originated at a fixed rate of 10% with a maturity of 5 years (annual payments). The issue will be overcollateralized by $8,000, and the issuer will receive all net cash flows after priority payments are made to each class of securities. If the residual cash flows for the mortgage company are given as below, what will the rate of return earned on the equity collateralization be? (round your answers to 2 decimals and ignore the percentage sign while entering. If the answer is 110.5412%, then enter your answer as 110.54)
Residual Class | |||
Year | Total CF into Pool | Total PMT to A,B,Z Classes | Residual |
0 | ? | ||
1 | $26,380 | $22,420 | ? |
2 | $26,380 | $24,720 | ? |
3 | $26,380 | $25,100 | ? |
4 | $26,380 | $25,250 | ? |
5 | $26,380 | $22,975 | ? |
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