Assume there is no prepayment and no servicing fees

Assignment Help Financial Management
Reference no: EM131303437

Given the following information, what is the total cash flow to Class A investors in year 1? (State your answer as a positive number, rounded to the nearest cent.)

A CMO is being issued with 3 tranches. The A tranche will consist of $20M of principal and have a coupon of 7%. The B tranche will have a coupon of 7.5% and a principal of $10M. The Z tranche will carry a coupon of 8.25% with a principal of $25M. The mortgages backing the security issued are FRM at 8.5% with 10 year maturities and annual payments (for simplicity). The issue will be overcollateralized by $3M and the issuer (residual) will receive cash flows only after all classes of investors have been completely repaid.

Priority payments will be made to the A tranche and will include the promised coupon. Interest will be accrued to the Z tranche until A is completely repaid. The B class will receive interest payments only until the A class is repaid. The A class will then receive all remaining CFs from the pool that year. After A is repaid, B will receive priority principal payments. The Z class will accrue interest at 8.25% until both A and B are repaid. It will receive current interest and principal payments at that time.

Assume there is no prepayment and no servicing fees.

Reference no: EM131303437

Questions Cloud

Liquid with some gaseous hydrocarbons : The Fischer-Tropsch (F-T) process was developed in Germany in 1923 to convert synthesis gas (i.e., a mixture of hydrogen and carbon monoxide) into liquid with some gaseous hydrocarbons. If Congress appropriates $27 billion to support the F-T process ..
Residential mortgages : Imagine you have a pool of 30 year residential mortgages (FRMs, fully amortizing), WAC=4%, monthly payments. The pool balance at the beginning of the month is 285,634,760. The mortgages, on average, have already made three years of payments (i.e. the..
Determine price she paid when she purchased the bond : Leann just sold a $10,000 par value bond for $9,800. The bond interest rate was 5% per year payable quarterly. Leann owned the bond for 3 years. The 1st interest payment she received was 3 months after she bought the bond. She sold it immediately aft..
What is the ending balance of class a securities : what is the ending balance of Class A securities after the year 1 payments? (State your answer as a positive number, rounded to the nearest cent.) A CMO is being issued with 3 tranches. The A tranche will consist of $20M of principal and have a coupo..
Assume there is no prepayment and no servicing fees : Given the following information, what is the total cash flow to Class A investors in year 1? A CMO is being issued with 3 tranches. The A tranche will consist of $20M of principal and have a coupon of 7%. The B tranche will have a coupon of 7.5% and ..
What is the future value of this amount over ten years : James Canter of Dallas, Texas is a good shopper. He always comparison shops and uses coupons every week. James figures he saves at least $40 a month as a result. Assuming an interest rate of 2 percent, what is the future value of this amount over ten..
Borrow money to buy from her credit union by puting : Amanda Forsythe of Tampa, Florida, must decide wheter to buy or lease a car she has selected. She has negotiated a purchase price of $24,700 and could borrow the money to buy from her credit union by puting $3000 down and paying $515 per month for 48..
Black-scholes model and binomial model : Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $28, (2) strike price is $35, (3) time to expiration is 2 months, (4) annualized risk-free rate is 6%, and (5) variance of stock ret..
Extended warranty on several of her major appiances : Allison Jones of Jonesboro, Arkansas, is considering paying $150 a year for an extended warranty on several of her major appiances. If the appliances are expected to last for five years and she can earn 2 percent on her savings, what would be the fut..

Reviews

Write a Review

Financial Management Questions & Answers

  Required rate of return on this stock according to model

You read that the company just paid $6.64 dividend per share and has a growth rate of 12%. You also read its share price is $140.76. You believe the constant growth dividend model applies perfectly to this properly valued stock. What is the required ..

  Prepare income statement-statement of stockholders equity

Preparing an Income Statement, Statement of Stockholders Equity, and Balance Sheet LO1-1 Assume that you are the president of Highlight Construction Company. At the end of the first year (December 31, 2014) of operations, the following financial data..

  Approximate real rate of return on this investment

Last year, you purchased a stock at a price of $53 a share. Over the course of the year, you received $2 in dividends and inflation averaged 2.8 percent. Today, you sold your shares for $53.9 a share. What is your approximate real rate of return on t..

  What is the dollar spread for this bill

A Treasury bill has a bid yield of 3.58% and an ask yield of 3.52%. The bill matures in 100 days. Assume a face value of $1,000. What is the dollar spread for this bill?

  What is the projects MIRR and IRR

A project has an initial cost of $41,125, expected net cash inflows of $12,000 per year for 9 years, and a cost of capital of 14%. What is the project's NPV?

  An unlevered firm has expected earnings

An unlevered firm has expected earnings of $2,401 and a market value of equity of $19,600. The firm is planning to issue $4,000 of debt at 6 percent interest and use the proceeds to repurchase shares at their current market value. Ignore taxes. What ..

  Using the net present value method of capital budgeting

Using the Net Present Value method of capital budgeting will always lead you to the economically correct decision because_____, however it can be misleading when comparing projects of ____.

  Three general unsecured creditors

Three general unsecured creditors are owed $45,000 as follows: Easy Does It Rentals, $15,000; Make Me a Deal Furniture, $5,000; and TV’s r Us, $25,000. After all other creditors are paid, the amount left for distribution to general unsecured creditor..

  Lease the car or purchase it with a two-year loan

After deciding you want a new car, you can either lease the car or purchase it with a two-year loan. The car you want costs $34,000. The dealer has a special leasing arrangement where you pay $97 today and $497 per month for the next two years. If yo..

  About the speculation

Speculation. You will use the following scenario to fill in the blanks. Blue Demon Bank expects that the Mexican peso will depreciate against the dollar from its spot rate of $.15 to $.14 in 10 days. The following interbank lending and borrowing rate..

  What is the length of the days sales in inventory

Scribble, Inc. has sales of $92,000 and cost of goods sold of $76,000. The firm had a beginning inventory of $22,000 and an ending inventory of $24,000. What is the length of the days' sales in inventory? (Round your answer to 2 decimal places.)

  Bonds issued by modern kitchens pay semi annually

The 7 percent bonds issued by Modern Kitchens pay semi annually, mature in eight years, and have a $1,000 face value. Currently, the bonds sell for $1,032. What is the yield to maturity?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd