Asset Pool:

20-year, 9% fixed rate Mortgages = $1,800,000, Overcollaterization = $400,000

Tranche Stated maturity Coupon Rate Amount Issued

A 8yrs 7.0% $500,000

B 11yrs 8.0% $400,000

C 3yrs 9.5% $300,000

Z 20yrs 10.0% $200,000

Equity = $400,000

All cash flows are annual.

a)Determine the annual cash flows to Tranche A. (4 points)

b)Determine the annual cash flows to Tranche B. (4 points)

c)Determine the annual cash flows to Tranche C. (4 points)

d)Determine the annual cash flows Tranche Z. (4 points)

e)Determine the annual residual cash flow to equity. (4 points)

Answer rating: 100% (QA)

To solve this problem we need to calculate the annual cash flows for each tranche and the equity bas... View the full answer