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EhBanc has just created a CMO using $800,000,000 in 4-year, annual-payment mortgages. The rate on the mortgages in the pool is 4%. The CMO has

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EhBanc has just created a CMO using $800,000,000 in 4-year, annual-payment mortgages. The rate on the mortgages in the pool is 4%. The CMO has two tranches: an IO tranche and a PO tranche. What are the expected payments to each tranche? (Do not round intermediate calculations. Round payments to nearest dollar. Use commas.) A B 1 Year Expected 10 Payment Expected PO Payment 2 1 3 2 4 3 5 4 Suppose that in year 2 there are aggregate prepayments of $150,000,000. How does this change the cash flows to the 10 and PO holders? (Do not round intermediate calculations. Round payments to nearest dollar. Use commas.) A B 1 New PO Payment Year New lo Payment 2 2 3 3 4 4

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