1. Goldtiger is issuing a CMO with 2 tranches: - Tranche A has $31 million in principal and a 1.6% coupon. - Tranche B has $18 million in principal and a 1.6% coupon.

1. The mortgages backing the security issued are FRM at a mortgage rate of 1.6% with 10 year maturities and annual payments. There is no guarantee/servicer fee. Prepayment is assumed to be 5% CPR. In year 1, what is the cash flow to investors in Tranche B? Round your answer to two decimal points (e.g. if your answer is $50,999.4532, write 50999.45).

2

Consider the following CMO:

- Tranche A issued for $12 million with a coupon of 6.5%

- Tranche B issued for $4 million with a coupon of 6.5%

- Z-Tranche issued for $4 million with a coupon of 6.5%

The securities are backed by a pool of fully amortizing 30-year fixed rate mortgages with WAC equal to 6.5% and monthly payments. There is assumed to be a 5% CPR in this pool and no servicing fee.

3.

What does this graph represent?

		Beginning balance on each tranche
		Cash flows to each tranche
		The remaining balance on each tranche
		Principal payments to each tranche

50000 100000 150000 200000 250000 o 1 11 21 31 41 51 61 71 81 91 101 111 121 131 141 151 161 171 181 191 201 211 221 231 241 251 261 271 281 291 301 311 321 331 341 351 Z BIA 50000 100000 150000 200000 250000 o 1 11 21 31 41 51 61 71 81 91 101 111 121 131 141 151 161 171 181 191 201 211 221 231 241 251 261 271 281 291 301 311 321 331 341 351 Z BIA