Question: Real Estate (Securities) Consider a sequential-pay CMO structure consisting of A, B, C and Z (accrual) tranches. In each of the following, indicate whether the

Real Estate (Securities)

Consider a sequential-pay CMO structure consisting of A, B, C and Z (accrual) tranches. In each of the following, indicate whether the statement is true or false. Explain your answer. a) The total cash flow for tranche A is always decreasing over time. True or False Explanation: Write your answer in your spreadsheet. b) Tranche B holders receive no cash flows until tranche A is fully paid off. True or False. Explanation: Write your answer in your spreadsheet. c) The principal balance for tranche Z is decreasing as long as tranche C is not fully paid off. True or False. Explanation: Write your answer in your spreadsheet. d) If tranche C is split into IO and PO pieces, then a higher prepayment rate decreases the market value of the 10 piece. True or False. Explanation: Write your answer in your spreadsheet. Consider a sequential-pay CMO structure consisting of A, B, C and Z (accrual) tranches. In each of the following, indicate whether the statement is true or false. Explain your answer. a) The total cash flow for tranche A is always decreasing over time. True or False Explanation: Write your answer in your spreadsheet. b) Tranche B holders receive no cash flows until tranche A is fully paid off. True or False. Explanation: Write your answer in your spreadsheet. c) The principal balance for tranche Z is decreasing as long as tranche C is not fully paid off. True or False. Explanation: Write your answer in your spreadsheet. d) If tranche C is split into IO and PO pieces, then a higher prepayment rate decreases the market value of the 10 piece. True or False. Explanation: Write your answer in your spreadsheet

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