Question: Consider a sequential pay CMO that is backed by 6 0 mortgages with average balance of $ 1 0 0 , 0 0 0 each.

Consider a sequential pay CMO that is backed by 60 mortgages with average balance of $100,000 each. The mortgages have monthly payments with WAM =15 years and WAC =4%. There is a servicing fee of 0.6% and prepayment is according to 100% PSA. There are two tranches in this CMO: tranch A issued for $3,000,000 and tranche B issued for $3,000,000. Suppose that in month 10, the beginning balance on tranche A is $2,733,990.91 and the beginning balance on tranche B is $3,000,000. How much cash flow do investors in tranche A receive in month 10?

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