Question: Consider a sequential pay CMO that is backed by 150 mortgages with average balance of $100,000 each. The mortgages have monthly payments with WAM =

Consider a sequential pay CMO that is backed by 150 mortgages

Consider a sequential pay CMO that is backed by 150 mortgages with average balance of $100,000 each. The mortgages have monthly payments with WAM = 15 years and WAC = 5%. There is a servicing fee of 0.6% and prepayment is according to 150% PSA. There are two tranches in this CMO: tranche A issued for $4,000,000 and tranche B issued for $11,000,000. How much cash flow do investors in tranche A receive in the first month? QUESTION 9 Consider the same CMO as in Question 8. How much is starting balance for tranche investors month QUESTION 10 Consider the same CMO as in Question 8. How much is the cash flow to investors in tranche B receive in month 2

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