Consider a new three-year CMO with the following features:

Two (2) tranches plus equity: O

'A' tranche principal of $34.0 million with an annual coupon of 3.61%

• 'Z' tranche coupon of 5.57% with a principal of $40.1 million
• Issue over-collateralized with $5.6 million of equity
• Mortgages backing the issue have a fixed rate of 6.53% with a maturity of three (3) years
• Payment structure: o Priority payments to the 'A' tranche to consist of A's promised coupon, all mortgage pool amortization, and any interest accrued to the 'Z' tranche Once 'A' tranche repaid, 'Z' tranche to receive its own interest and all mortgage pool amortization o Equity class to only get residual cash flows

All payments are made annually at the end of the year. All rates are effective annual rates.

15. How much total cash flow will be received by the 'A' tranche in year 1 of the CMO?

1. $26.95 million
2. $27.66 million
3. $28.37 million
4. $29.08 million
5. $29.78 million

16. How much total cash flow will be received by the equity class in year 1 of the CMO?

1. $1.61 million
2. $1.66 million
3. $1.70 million
4. $1.74 million
5. $1.79 million

17. How much total cash flow will be received by the 'Z' tranche in year 2 of the CMO?

1. $21.48 million
2. $22.03 million
3. $22.58 million
4. $23.13 million
5. $23.68 million

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