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

question 31

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.

If at the end of the first year,the trustee of the CMO receives total cash flows of $10 million,how are they distributed to Tranche A and B,respectively?

• A)$5,558,628;$4,441,372.
• B)$4,441,372;$5,558,868.
• C)$4,000,000;$6,000,000.
• D)$6,000,000;$4,000,000.

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