A CMO is being issued with 2 tranches. The A tranche will consist of $ 5 0
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Question:
A CMO is being issued with tranches. The A tranche will consist of $MM of principal and have a coupon of The B tranche will consist of $MM of principal and have a coupon of The mortgages backing the security issued are FRM at with year maturities and annual payments for simplicity
Priority payments will be made to the A tranche and will include the promised coupon. The B class will only receive interest payments until the A class is repaid.
Assume there is no prepayment and no servicing fees.
A Given the information presented above, what is the total cash flow to each class of investors in year ie How much will class A receive and how much will Class B receive
B What is the balance of the Class A tranche at the end of year
C What is the balance of the Class B tranche at the end of year
Please show steps and answers using a excel file.
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