A CMO has been issued with 3 tranches and a residual. At origination: - Tranche A investors own $9 thousand of principal with a coupon rate of 3.50%. - Tranche B investors own $17 thousand of principal with a coupon rate of 3.70%. - Tranche Z investors own $12 thousand of principal with a coupon rate of 4.50%. - The residual carries $1 thousand of principal and receives all residual payments. Mortgages backing the security issued are fully amortizing fixed rate with mortgage rate of 4.50% with 30 year maturities and monthly payments. Assume no servicing/guarantee fee and no prepayments. Remember, the sum of tranches' principal is the total principal (balance) principal owed by the mortgage pool. What is the mortgage pool's starting balance at origination? Round your answers to cents (e.g. if your answer is $5600.0444, write 5600.04).

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question
A CMO has been issued with 3 tranches and a residual. At origination:
- Tranche A investors own $9 thousand of principal with a coupon rate of 3.50%.
- Tranche B investors own $17 thousand of principal with a coupon rate of 3.70%.
- Tranche Z investors own $12 thousand of principal with a coupon rate of 4.50%.
- The residual carries $1 thousand of principal and receives all residual payments.
Mortgages backing the security issued are fully amortizing fixed rate with mortgage rate of 4.50% with 30 year maturities and
monthly payments. Assume no servicing/guarantee fee and no prepayments. Remember, the sum of tranches' principal is
the total principal (balance) principal owed by the mortgage pool.
What is the mortgage pool's starting balance at origination? Round your answers to cents (e.g. if your answer is $5600.0444,
write 5600.04).
Transcribed Image Text:A CMO has been issued with 3 tranches and a residual. At origination: - Tranche A investors own $9 thousand of principal with a coupon rate of 3.50%. - Tranche B investors own $17 thousand of principal with a coupon rate of 3.70%. - Tranche Z investors own $12 thousand of principal with a coupon rate of 4.50%. - The residual carries $1 thousand of principal and receives all residual payments. Mortgages backing the security issued are fully amortizing fixed rate with mortgage rate of 4.50% with 30 year maturities and monthly payments. Assume no servicing/guarantee fee and no prepayments. Remember, the sum of tranches' principal is the total principal (balance) principal owed by the mortgage pool. What is the mortgage pool's starting balance at origination? Round your answers to cents (e.g. if your answer is $5600.0444, write 5600.04).
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Secondary Mortgage Market
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education