Question 1: Collateralized Mortgage Obligations (25 points) Consider the following Collateralized Mortgage Obligations with four classes of securities issued. Tranche A Asset Pool: 20-year, 9% fixed rate Mortgages = $1,800,000 Overcollaterization = $400,000 Stated maturity Coupon Rate 7.0% 8.0% 9.5% 10.0% Equity = $400,000 All cash flows are annual. B 7 years 11 years 13 years 18 years Amount Issued $500,000 $400,000 $300,000 $200,000 C Z - a) Determine the annual cash flows to Tranche A. (5 points) b) Determine the annual cash flows to Tranche B. (5 points) c) Determine the annual cash flows to Tranche C. (5 points) d) Determine the annual cash flows Tranche Z. (5 points) e) Determine the annual residual cash flow to equity. (5 points) Question 1: Collateralized Mortgage Obligations (25 points) Consider the following Collateralized Mortgage Obligations with four classes of securities issued. Tranche A Asset Pool: 20-year, 9% fixed rate Mortgages = $1,800,000 Overcollaterization = $400,000 Stated maturity Coupon Rate 7.0% 8.0% 9.5% 10.0% Equity = $400,000 All cash flows are annual. B 7 years 11 years 13 years 18 years Amount Issued $500,000 $400,000 $300,000 $200,000 C Z - a) Determine the annual cash flows to Tranche A. (5 points) b) Determine the annual cash flows to Tranche B. (5 points) c) Determine the annual cash flows to Tranche C. (5 points) d) Determine the annual cash flows Tranche Z. (5 points) e) Determine the annual residual cash flow to equity. (5 points)