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

question 35

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 principals outstanding on Tranches A and B, respectively, after the CMO distributes the $10 million of cash flows?

• A)$50 million; $47 million.
• B)$47 million; $50 million.
• C)$48 million; $48 million.
• D)$50 million; $48 million.
• E)$50 million; $50 million.

---

Definitions:

Product Development

The process of bringing a new product or service to the market, from idea generation and design to commercialization.

Introduction Stage

The phase in the product life cycle where a new product is launched into the market, characterized by initial promotional efforts and low sales growth.

Marketing Objective

Specific goals set by a business when promoting its products or services to potential consumers that should be achieved within a certain timeframe.

Introduction Stage

The first stage of a product's life cycle, where it is being introduced to the market, awareness is built, and initial sales growth is sought.