HADM 4280/6280 Group Homework Assignment 2 You are NOT allowed to consult with students, not in your group. Each group must submit one solution. 1. Consider the following of Freddie Mac REMIC-CMO. The collateral for the REMIC is $100,000,000. The underlying mortgages have a contract rate of 7.75% and maturity of 360 months. The CMO's will pay monthly and the tranche allocations and the tranche coupons are as follows: Tranche A B C Z Prin. Share (%) 30 28 28 14 0 Coupon (%) 6.50 6.75 7.00 7.00 7.375 Calculate cash flows and balances for each tranche the first three months. Assume that the monthly SMM is constant at .5% and that the servicing fee is 37.5 basis points.