Consider a sequential pay CMO that is backed by $60$ mortgages with average balance of $$100,000$ each. The mortgages have monthly payments with WAM $=15$ years and WAC $=4\%.$ There is a servicing fee of $0\mathrm{.}6\%$ and prepayment is according to $100\%$ PSA. There are two tranches in this CMO: tranch A issued for $$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\mathrm{.}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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Calculation for Tranche A Cash Flow in Month 10 1 Calculate Interest Due on Tranche A Beginning Bala... View the full answer