Given the following information about a CMO: - $5 million of mortgage pool principal assigned...
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Given the following information about a CMO:
- $5 million of mortgage pool principal assigned to the floater class. $2 million assigned to the inverse floater class.
- Floater class coupon rule: LIBOR + 0.2%
- Inverse floater class coupon rule: 12.5% - L x LIBOR
- LIBOR in the first month is 3%
1b. What is the coupon leverage L? Round your answer to two decimal points (e.g. if your answer is 1/3, write 0.33).
A CMO is being issued with 2 tranches: - Tranche A has $20 million in principal and a 6.2% coupon. - Tranche B has $13 million in principal and a 6.2% coupon. The mortgages backing the security issued are FRM at a mortgage rate of 6.2% with 10 year maturities and annual payments. There is no guarantee/servicer fee. Prepayment is assumed to be 5% CPR. Remember in this case, the sum of the two tranches' principal is the total amount of principal owed by the mortgage pool. What is the starting pool balance for Tranche A investors in year 2? (Note: same as the ending pool balance for Tranche A investors in year 1) Round your answer to two decimal points (e.g. if your answer is $45,666.6666, write 45666.67).
1c More senior tranches tend to have lower credit rating because they get paid back sooner.
True
False
Given the following information about a CMO:
- $5 million of mortgage pool principal assigned to the floater class. $2 million assigned to the inverse floater class.
- Floater class coupon rule: LIBOR + 0.2%
- Inverse floater class coupon rule: 12.5% - L x LIBOR
- LIBOR in the first month is 3%
1b. What is the coupon leverage L? Round your answer to two decimal points (e.g. if your answer is 1/3, write 0.33).
| A CMO is being issued with 2 tranches: - Tranche A has $20 million in principal and a 6.2% coupon. - Tranche B has $13 million in principal and a 6.2% coupon. The mortgages backing the security issued are FRM at a mortgage rate of 6.2% with 10 year maturities and annual payments. There is no guarantee/servicer fee. Prepayment is assumed to be 5% CPR. Remember in this case, the sum of the two tranches' principal is the total amount of principal owed by the mortgage pool. What is the starting pool balance for Tranche A investors in year 2? (Note: same as the ending pool balance for Tranche A investors in year 1) Round your answer to two decimal points (e.g. if your answer is $45,666.6666, write 45666.67).
1c More senior tranches tend to have lower credit rating because they get paid back sooner. True False |
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