Question
Consider a CMO with an IO and PO tranche backed by a pool of mortgages with the following characteristics: FRM with 3.5% interest issued for
Consider a CMO with an IO and PO tranche backed by a pool of mortgages with the following characteristics:
FRM with 3.5% interest issued for 15 years with monthly payment prepayment rate 5% CPR no servicing / guarantee fee
At the beginning of the third year, the principal outstanding on the mortgages is $4,046,179.41.
You will need to use the following formula (dont forget to keep 8 decimal points): SMM =1(1CPR)1/12
A. How much did the IO tranche investors receive in month 25?
B. What was the prepayment amount in month 25?
C. What was the scheduled principal amount paid to the issuer in month 25?
D. How much were the investers in the PO strip paid in month 25?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started