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balance sheet . A CMO with four tranches has just been issued by Pretty Lake using the GNMAs as collateral. Each tranche has a face value of $25 million and makes monthly payments. The annual coupon rates are 4.5 percent for Tranche A, 5 percent for Tranche B, 5.5 percent for Tranche C, and 6.5 percent for Tranche D.
- Which tranche has the shortest maturity, and which tranche has the most prepayment protection?
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- 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).A client deposits 150,000 in a bank, with the bank agreeing to pay 6% annual effective for three years. The client indicates that one third of the account balance will be withdrawn at the end of the first year and half of the account balance will be withdrawn at the end of the second year. The bank can invest in either one year or three year zero coupon bonds. The one year bonds yield 7% and the three year bonds yield 10%. Develop an investment program based on immunization.Desert Trading Company has issued $100 million worth of long-term bonds at a fixed rate of 10%. The firm then enters into an interest rate swap where it pays SOFR and receives a fixed 5.2% on notional principal of $100 million. What is the firm's effective interest rate on its borrowing? Note: Enter value as positive amount. Round your answer to 1 decimal place. Effective interest rate %
- Paul Dirac & Associates begin operations on 1/1/X1 by issuing a 3.00 year term (Bullet) bond with a par value of $3,800,000. The bond pays interest semi annually. On the date of issuance, the annual coupon rate of the bond is 3.000% while the annual required rate of return in the debt capital markets (the discount rate) is 4.250%. Dirac assumes that he will earn $1,700,000 in cash revenues and incur cash operating expenses of 45.000% of revenues each 6 month period for the next 3.00 fiscal years. The corporate tax rate is assumed to be 21.00%. Questions 1) Create an amortization table for the Bond. 2) What is the Price of the bond? What is the Value of any discount or premium? 3) Provide all journal entries and T-accounts for this transaction over the next 3 years. 4) Based on the information in the problem, create semi-annual pro-forma financial statements (I/S, SRE, B/S) for Dirac & Associates for the next 3 years (6 Semi-annual periods).Energetic Engines is trying to estimate its cost bonds that pay $20 interest every six months. Each bond, which has a $1,000 face value and matures in six years, is currently selling for $900. Estimate Energetic’s cost of retained earnings using the bond-plus-risk-premium approach.Charter Corp. has issued 1,554 debentures with a total principal value of $1,554,000. The bonds have a coupon interest rate of 9%. a. What dollar amount of interest per bond can an investor expect to receive each year from Charter? b. What is Charter's total interest expense per year associated with this bond issue? c. Assuming that Charter is in a 39% corporate tax bracket, what is the company's net after-tax interest cost associated with this bond issue?
- You are engaged by a CPA firm to help audit the financial statements of one of its clients, GTE Corporation. GTE is the holder of a bond issued by AT&T, which will mature in 12 years, with a par value of $1,000, and an annual coupon rate of 8%. If the market prevailing interest rate is 9% on the bonds in the same category, the CPA firm asks you to help estimate the value or price of the bond.The MZ Mortgage Company is issuing a CMO with three tranches. The A tranche will consist of $40.5 million with a coupon of 8.25 percent. The B tranche will be issued with a coupon of 9.0 percent and a principal of $22.5 million. The Z tranche will carry a coupon of 10.0 percent with a principal of $45 million. The mortgages backing the security issue were originated at a fixed rate of 10 percent with a maturity of 10 years (annual payments). The issue will be overcollateralized by $4.5 million, and the issuer will receive all net cash flows after priority payments are made to each class of securities. Priority payments will be made to the class A tranche and will include the promised coupon, all amortization from the mortgage pool, and interest that will be accrued to the Z class until the principal of $40.5 million due to the A tranche is repaid. The B class securities will receive interest-only payments until the A-class is repaid and then will receive priority payments of…Exam Corp. is in need of cash. On 1/1/2023 Exam Corp. issues bonds with a $350,000 face value. The bonds have an 7.50% coupon rate. The market rate is 18%. The bonds have a life of 6 years, and are compounded semiannually. At the time of issuance, the price of the bonds is correctly calculated to be $218,420. All answers below can be rounded to the nearest dollar. What is the journal entry Exam Corp. will record on 6/30/23? Dr. Interest Revenue $19,658 Cr. Cash $13,125 Cr. Discount $6,533 Dr. Interest Expense $19,658 Cr. Discount $6,592 Cr. Cash $26,250 Dr. Interest Payable $19,658 Cr. Premium $6,592 Cr. Cash $26,250 Dr. Interest Expense $19,658 Cr. Cash $13,125 Cr. Premium $6,533 Dr. Interest Expense $19,658 Cr. Cash $13,125 Cr. Discount $6,533
