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

question 98

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.

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Definitions:

Just-in-time System

A production strategy that strives to improve a business's return on investment by reducing in-process inventory and associated carrying costs through receiving goods only as they are needed in the production process.

Client Specifications

Client specifications are detailed descriptions provided by a client outlining the requirements, standards, and criteria for a project or product.

Quality

Good or service that is free of deficiencies.

Prices

The amounts of money expected, required, or given in payment for something.