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Question
The following information is for a collateralized mortgage obligation (CMO). Tranche A has a face value of $110 million and pays 5 percent annually. Tranche B has a face value of $90 million and pays 7 percent annually.
What is the principal outstanding on Tranche A and Tranche B after the end of year payment in the previous question?
A. $110 million on Tranche A and $90 million on Tranche B
B. $95 million on Tranche A and $90 million on Tranche B.
C. $106.8 million on Tranche A and $90 million on Tranche B.
D. $110 million on Tranche A and $86.8 million on Tranche B.
E. $108.4 million on Tranche A and $88.4 million on Tranche B.
Answer
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