The Following Information Is for a Collateralized Mortgage Obligation (CMO)

question 95

Multiple Choice

The following information is for a collateralized mortgage obligation (CMO) .Tranche A has a face value of $50 million and pays 6 percent annually.Tranche B has a face value of $50 million and pays 8 percent annually.All mortgages have maturities of 30 years. What are the annual payments promised to Tranche A and Tranche B, respectively, assuming no prepayments and non-amortization?

• A)$3,632,446; $4,000,000.
• B)$4,000,000; $3,000,000.
• C)$3,000,000; $4,000,000.
• D)$3,632,446; $4,441,372.
• E)$4,441,372; $3,632,446.

---

Definitions:

Own-price Elasticity

A measure of how much the quantity demanded of a good responds to a change in its own price, often used to understand consumer sensitivity to price changes.

Quantity Demanded

The amount of a good or service that consumers are willing and able to purchase at a particular price.

Rice

A staple food grain consumed worldwide, known for its versatility and ability in serving as a primary source of energy.

Normal Goods

For normal goods, demand increases as income increases.