Question
Consider a CMO with tranches A, B and a residual. The CMO is backed by a pool of fully amortizing fixed rate mortgages with monthly
Consider a CMO with tranches A, B and a residual. The CMO is backed by a pool of fully amortizing fixed rate mortgages with monthly payments. Assume that there is a servicing fee and some anticipated prepayment. What is the correct formula for computing cash flows to the residual tranche?
| a | (Scheduled Payment) + (Prepayment) - (Servicing Fee) - (Cash Flow to Tranche A) - (Cash Flow to Tranche B) | |
| b | (Scheduled Payment) + (Prepayment) - (Cash Flow to Tranche A) - (Cash Flow to Tranche B) | |
| c | (Scheduled Payment) + (Prepayment) + (Servicing Fee) - (Cash Flow to Tranche A) - (Cash Flow to Tranche B) | |
| d | (Scheduled Payment) + (Servicing Fee) - (Cash Flow to Tranche A) - (Cash Flow to Tranche B) |
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Finance And Financial Markets
Authors: Keith Pilbeam
2nd Edition
1403948356, 978-1403948359
