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Assume that a pool of mortgages with aggregate par value of $500 million is used as collateral for an asset backed security. The weighted average
Assume that a pool of mortgages with aggregate par value of $500 million is used as collateral for an asset backed security. The weighted average coupon on the mortgages is 8.1% and the pass-through coupon rate is 7.2%.
- Assume in addition to the interest payment you calculated in ( above, scheduled principal payment of $20 million and additional principal prepayment of $15 million is made during the month. Prepare a schedule to show all the disbursements to the four tranches.
- Assume immediately after the disbursements above, there are defaults in the mortgages and the pool repossessed and sold the underlying properties to realize a net cash flow of $250 million. How should that be distributed to the tranches?
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