Mutual Bank issues a $23 million collateralized mortgage obligation (CMO). There are 4 tranches in the CMO
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Question:
Mutual Bank issues a $23 million collateralized mortgage obligation (CMO). There are 4 tranches in the CMO as follows.
Tranche | Total bond value | Interest rate |
A | $5 million | 2.5% |
B | $5 million | 3.5% |
C | $6 million | 4.5% |
D | $7 million | 5.5% |
In the first month a total payment of $600,000 is received from the borrowers.
A.Calculate the interest payments to each of the four tranches A, B, C and D.
B.How much of the bond value will be redeemed in each of the four tranches after the first month payment is received.
Related Book For
Calculus For Business, Economics And The Social And Life Sciences
ISBN: 9780073532387
11th Brief Edition
Authors: Laurence Hoffmann, Gerald Bradley, David Sobecki, Michael Price
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