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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 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.
Answer
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