Consider the following Collateralized Mortgage Obligations (CMOs) with Tranche A and Tranche Z securities issued recently.

Assets: 5-year, 10% fixed rate mortgage pool = $1,300,000 (including an overcollaterization of $300,000)
Tranche	Stated maturity	Coupon Rate	Amount Issued
A	3 years	6%	$600,000
Z	5 years	11%	$400,000
All cash flows are annual.

1. a) If the current market interest rate for Tranche A is 6%, determine the fair market value of Tranche A. (5 points)

2. b) If the current market interest rate for Tranche Z is 13%, determine the fair market value of Tranche Z. (10 points)