Question: 5. Credit Swatch just structured a $1 billion CMO with $750 million allocated to the PAC class. The deal is off FNMA 30-year 4.5% coupon

5. Credit Swatch just structured a $1 billion CMO with $750 million allocated to the PAC class. The deal is off FNMA 30-year 4.5% coupon MBS. The companion class collateral will consist of a floater, an inverse IO and a super PO. In orer to sell the floater at a 35 bp DM (discount margin) off 1-month LIBOR, the floater must have a 6.25% cap. a) What balance amount is allocated to the companion class? b) In order the create a 6.25% cap on the floater how much principal is allocated to the floater and how much is allocated to the super PO? c) What is the cap on the inverse IO? d) What is the coupon formula for the inverse IO? e) Suppose LIBOR is 3%, what are the floater and inverse IO coupons?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

The Wild Rose Company has $1,000 par value (maturity value) bonds outstanding at 9 percent interest. The bonds will mature in 20 years with annual payments. Compute the current price of the bonds if...

Super PO 5. Credit Swatch just structured a $1 billion CMO with $750 million allocated to the PAC class. The deal is off FNMA 30-year 4.5% coupon MBS. The companion class collateral will consist of a...

1 5. Lemon Brothers Just structured a $1 billion CMO with $750 million allocated to the PAC class. The deal is off FNMA 30-year 4.5% coupon M35. The structurer determines the best execution of the...

5. Lemon Brothers just structured a $1 billion CMO with $732 million allocated to the PAC class. The deal is off FNMA 30-year 3% coupon MBS. The structurer determines the best execution of the...

if you want you can use my all questions. but i want all the answers. thank you Pts 1. Assume annual yields in the table below. Answer the questions below to fill in the missing values in the table....

8. Lemon Brothers just structured a \$1 billion CAIO with $650 million allocated to the PAC Class. The deal is off FNCL 30-year 5.5\% cotpon MBS. Tho ntructuret determines the best exceution of the...

4. Consider two CMO structures using the same $1 billion balance of MBS pools: Structure 1: 5665 million PAC class, $335 million companion class Structure 2: S734 million PAC class, S266 million...

4. Consider two CMO structures using the same $1 billion balance of MBS pools: Structure 1: $665 million PAC class, $335 million companion class Structure 2: $734 million PAC class, $266 million...

Dear Dr Fids, Can you please help these questions? It is about MBS cash flow. R Generating MBS cash flows can be messy so we are going to write some functions in R that allows us to generate the cash...

A manager is trying to decide whether to build a small, medium, or large facility. Demand can be low, average, or high, with the estimated probabilities being 0.25, 0.40, and 0.35, respectively. A...

Estes Company issues 300 shares of $50 par preferred stock and 1,000 shares of $10 par common stock in a package sale. Total proceeds received amount to $39,000. Required Record the transaction for...

The ratio measures how much of the profit is retained in the firm versus paid out to shareholders as dividends. dividend payout return on equity operating profit margin return on assets

A company is preparing completing their Cash Budget. The following data has been prepared for cash receipts and payments. January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash...