Question: John Doe is considering adding a CMO to his portfolio. Tranche A has an outstanding balance of $100.000 million and pays $1.0 million in principal

John Doe is considering adding a CMO to his portfolio. Tranche A has an outstanding balance of $100.000 million and pays $1.0 million in principal in month 10. Research indicates the PSA is 100 and the pass-through rate for tranche A is 7.00%. If all of the principal is paid to tranche A and the outstanding balance on the CMO is $300 million what is the cash flow to tranche A in months 10 and 11?

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