Consider a pool of $300 million, 2-year maturity percent per year paid semiannually. Construct a 2-year collateralized mortgage obligation mortgage pool as collateral. The pool has three tranches, where tranche A offers the least protection against prepayment and tranche C offers the most protection against prepayment. $100 million receives semiannual payments at 10 percent per year, tranche B of $100 million receives semiannual payments at 10 percent per year, and tranche C of $100 million receives semiannual payments at 10 percent per year.

Q: Suppose there is a prepayment of $120 at the end of the first six-month period. What is the total amount allocated to tranche B at the end of the second six-month period? A) $35.87M B) $39.23M C) $10.92M D) $58.88M E) $47.62M

A Securitiration A Securitiration