Answered step by step
Verified Expert Solution
Question
1 Approved Answer
i need help with b , c , d and e 1. The Nz Mortgage Company issuing a CMO with three tranches. The A tranche
i need help with b , c , d and e
1. The Nz Mortgage Company issuing a CMO with three tranches. The A tranche will consist of $40.5 million with a coupon 2000 of 8.25 percent. The Branche will be facued with a coupon of 9.0 percent and a principal of $22.5 million. The Ztranche will Carry a coupon of 10.0 percent with a principal of 15 million. The mortgages backing the security are were originated at a fixed rate of 10 percent with a maturity of 10 years (annual payment). These will be overcollateralised by 24.5 million, and the ser will receive alle cash flows after priority payments are made to each class of securities. Priority payments will be made to the class A tranche and will include the promised coupon, all amortization from the mortgage pool and interest that will be accrued to the class until the principal of $40.5 million due to the Atranche is repaid. The class securities will receive interest-only payments until the A class is repaid, and then will receive priority payments of amortization and accrued interest. The class will accrue interest at 10 percent until both A and B classes are repaid. It will receive current interest and principal payments at that time. a What will be the weighted average coupon (WAC) on the CMO when issued? b. What will be the maturity of each tranche assuming no prepayment of mortgages in the pool? c. What will be the WAC at the end of year 37 year 42 years? d. If class A, B, and Z investon demand an 8.5 percent, 9.5 percent, and 9.75 percent yield to maturity, respectively, at the time of so, what price should MZ Mortgage Company ask for each security? How much will the company receive as proceeds from the CMO issue? e. What are the residual cash flows to MZ? What rate of return will be earned on the equity overcollateralization? f. Optional Assume that the mortgages in the underlying pool prepay at the rate of 10 percent per year. How will your answers in (6) change? Optional Assume that immediately after the securities are issued in case the price of all securities suddenly trades up by 10 percent over the issue price. What will the yield to maturity be for each security - d8rTTG2Tzfwigmp 1. The Mortgage Company issuing a CMO with three tranches. The A tranche will consist of 540.5 million with a coupon 2000 of 8.25 percent. The Branche will be issued with a coupon of 9.0 percent and a principal of 522.5 million. The Ztranche will Carry a coupon of 10.0 percent with a principal of 545 million. The mortgages backing the security issue were originated at a fixed rate of 10 percent with a maturity of 10 years annual payments). The issue will be overcollateralized by 1.5 million, and the immer will receive all me cash flows after priority Payments are made to each class of securities. Priority payments will be made to the class A tranche and will include the promised coupon, all amortization from the mortgage pool and interest that will be accrued to the Z class until the principal of 40.5 million due to the Atranche is repaid. The class securities will receive interest-only payments until the A class is repaid, and then will receive priority Payments of amortization and accrued interest. The Z class will accrue interest at 10 percent until both A and B classes are repaid. It will receive current interest and principal payments at that time. a. What will be the weighted average coupon (WAC) on the CMO when issued? b. What will be the maturity of each tranche assuming to prepayment of mortgages in the pool? c. What will be the WAC at the end of year 37 year 4 year $7 4. If class A, B, and Z investors demand an 3.5 percent 9.5 percent, and 9.75 percent yield to maturity, respectively, at the time of what price should MZ Mortgage Company ask for each security? How much will the company receive as proceeds from the CMO Issue e. What are the residual cash flows to MZ? What rate of retum will be earned on the equity overcollateralization 1. Optional Assume that the mortgages in the underlying pool prepay at the rate of 10 percent per year. How will your answers in () change? Optional Assume that immediately after the securities are issued in case the price of all securities suddenly trades up by 10 percent over the issue price. What will the yield to ma y be for each security 1. The Nz Mortgage Company issuing a CMO with three tranches. The A tranche will consist of $40.5 million with a coupon 2000 of 8.25 percent. The Branche will be facued with a coupon of 9.0 percent and a principal of $22.5 million. The Ztranche will Carry a coupon of 10.0 percent with a principal of 15 million. The mortgages backing the security are were originated at a fixed rate of 10 percent with a maturity of 10 years (annual payment). These will be overcollateralised by 24.5 million, and the ser will receive alle cash flows after priority payments are made to each class of securities. Priority payments will be made to the class A tranche and will include the promised coupon, all amortization from the mortgage pool and interest that will be accrued to the class until the principal of $40.5 million due to the Atranche is repaid. The class securities will receive interest-only payments until the A class is repaid, and then will receive priority payments of amortization and accrued interest. The class will accrue interest at 10 percent until both A and B classes are repaid. It will receive current interest and principal payments at that time. a What will be the weighted average coupon (WAC) on the CMO when issued? b. What will be the maturity of each tranche assuming no prepayment of mortgages in the pool? c. What will be the WAC at the end of year 37 year 42 years? d. If class A, B, and Z investon demand an 8.5 percent, 9.5 percent, and 9.75 percent yield to maturity, respectively, at the time of so, what price should MZ Mortgage Company ask for each security? How much will the company receive as proceeds from the CMO issue? e. What are the residual cash flows to MZ? What rate of return will be earned on the equity overcollateralization? f. Optional Assume that the mortgages in the underlying pool prepay at the rate of 10 percent per year. How will your answers in (6) change? Optional Assume that immediately after the securities are issued in case the price of all securities suddenly trades up by 10 percent over the issue price. What will the yield to maturity be for each security - d8rTTG2Tzfwigmp 1. The Mortgage Company issuing a CMO with three tranches. The A tranche will consist of 540.5 million with a coupon 2000 of 8.25 percent. The Branche will be issued with a coupon of 9.0 percent and a principal of 522.5 million. The Ztranche will Carry a coupon of 10.0 percent with a principal of 545 million. The mortgages backing the security issue were originated at a fixed rate of 10 percent with a maturity of 10 years annual payments). The issue will be overcollateralized by 1.5 million, and the immer will receive all me cash flows after priority Payments are made to each class of securities. Priority payments will be made to the class A tranche and will include the promised coupon, all amortization from the mortgage pool and interest that will be accrued to the Z class until the principal of 40.5 million due to the Atranche is repaid. The class securities will receive interest-only payments until the A class is repaid, and then will receive priority Payments of amortization and accrued interest. The Z class will accrue interest at 10 percent until both A and B classes are repaid. It will receive current interest and principal payments at that time. a. What will be the weighted average coupon (WAC) on the CMO when issued? b. What will be the maturity of each tranche assuming to prepayment of mortgages in the pool? c. What will be the WAC at the end of year 37 year 4 year $7 4. If class A, B, and Z investors demand an 3.5 percent 9.5 percent, and 9.75 percent yield to maturity, respectively, at the time of what price should MZ Mortgage Company ask for each security? How much will the company receive as proceeds from the CMO Issue e. What are the residual cash flows to MZ? What rate of retum will be earned on the equity overcollateralization 1. Optional Assume that the mortgages in the underlying pool prepay at the rate of 10 percent per year. How will your answers in () change? Optional Assume that immediately after the securities are issued in case the price of all securities suddenly trades up by 10 percent over the issue price. What will the yield to ma y be for each security
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started