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Question
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.
Answer
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