# Imagine a mortgage pool that consists of 100 \$1,200 mortgages. (No, this is not 1910. It is just that \$120,000 worth of mortgages is an easier number to work with than \$120,000,000). The mortgages pay an average of 7.80%, compounded monthly. Imagine that Collateralized Mortgage Obligations (CMOs) consisting of four tranches are issued on this mortgage pool. The first obligation is to pay the interest on all four tranches. tranche A will receive an interest rate of 7.14%, tranche B will receive an interest rate of 7.26%, tranche C will receive an interest rate of 7.38%, and tranche D will receive an interest rate of 8.46%. Assume initially that the principal owed for each tranche is \$30,000. If the total payments for a month exceeds the total accrued interest owed to all four tranches, then the principal on tranche A will be paid down. Only if the principal owed to tranche A is completely paid off, will any extra payments for the month be used to pay off principal owed to tranche B. Only if the principal owed to tranches A and B are completely paid off, will any extra payments for the money be used to pay off principal owed to tranche C. And finally, only if the principal owed to tranches A, B, and C are completely paid off, will any extra payments for the month be used to pay off principal owed to tranche D. Assume the total payments for the mortgage pool are as shown below for the first six months: Month 1: \$ 10,800 Month 2: \$ 14,400 Month 3: \$ 18,000 Month 4: \$ 24,000 Month 5: \$ 30,000 Month 6: \$ 14,400 Determine the total monthly payments for each tranche and put the answers in the table below: Trenche A payment Trenche B payment Trenche C payment Trenche D payment Month 1 Month 2 Month 3 Month 4 Month 5 Month 6

Imagine a advance pool that consists of 100 \$1,200 mortgages.
(No, this is not attribuboard attribuboard attribuboard 1910. It is proportioned that \$120,000 rebuke of advances is an
easier reckon to operation with than \$120,000,000). The advances rapid an
average of 7.80%, compounded monthly. Imagine that Collateralized
Advance Bonds (CMOs) consisting of four tranches are issued on this
advance pool. The highest bond is to rapid the concern on every four
tranches. tranche A procure entertain an concern rebuke of 7.14%, tranche B
procure entertain an concern rebuke of 7.26%, tranche C procure entertain an
concern rebuke of 7.38%, and tranche D procure entertain an concern rebuke of
8.46%. Assume initially that the highest owing coercion each tranche is \$30,000.

If the completion rapidments coercion a month exceeds the completion accrued interest
owing to every four tranches, then the highest on tranche A procure be paid
down. Solely if the highest owing to tranche A is perfectly paid off, procure
any extra rapidments coercion the month be used to rapid unstudied highest owing to
tranche B. Solely if the highest owing to tranches A and B are completely
paid unstudied, procure any extra rapidments coercion the currency be used to rapid off
highest owing to tranche C. And finally, solely if the highest owing to
tranches A, B, and C are perfectly paid unstudied, procure any extra payments coercion
the month be used to rapid unstudied highest owing to tranche D. Assume the completion
payments coercion the advance pool are as shown under coercion the highest six months:

Month 1: \$ 10,800
Month 2: \$ 14,400
Month 3: \$ 18,000
Month 4: \$ 24,000
Month 5: \$ 30,000
Month 6: \$ 14,400

Determine the completion monthly rapidments coercion each tranche and put the

Trenche A rapidment Trenche B rapidment Trenche C rapidment Trenche D payment

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6