Q-6. If you had a CMO with 10% FRMs, and a tranche with a 8% coupon rate with a
ID: 2785526 • Letter: Q
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Q-6. If you had a CMO with 10% FRMs, and a tranche with a 8% coupon rate with a par value of $20,000,000. What would be the notional amount for a 690 structured IO formed from this tranche? A. S3,333,333 B. $4,444,444 C. S6,666,667 D. S10,000,000 E. This type of security would not have a notional amount assigned to it. Q-7. What is the formula for the rate is paid to the inverse oater class in the following scenario: Floater and inverse oater securities are created with 80M allocated to the oater class and 20M allocated to the inverse oater class. The mortgages in the pool have a WAC of 6%. The oater class is paid LIBOR+30bp A. X-LIBOR B. X-0.288-4LIBOR C. X-LIBOR-30bp D. X-0.057-(4/5) LIBOR] E. X-0.285 (/5)*LIBOR] Q-8. Find the max cap rate for the oating rate security for the following pool: Floater and inverse oater created from 100M pool with WAC 7%; 60% allocated to oater: 40% allocated to inverse oater; oater earns LIBOR-80bp A. 0.049 B. 0.070 D. 0.125 E. 0.133 Q-8.Which of the following about Z-spread is true? A. Z-spread is another term for nominal spread. B. Z-spread is an appropriate metric to evaluate RMBS C. Z-spread and OAS are identical if the yield curve is at D. Z-spread and OAS are identical if the security has no embedded options E. None of the aboveExplanation / Answer
Answer 6: option c i.e. $6,666,667.
Answer 7: option b i.e. X= 0.288- 4LIBOR.
Answer 8: option c i.e. 0.117.
Answer 9: option d i.e Z-spread and OAS are identical if the security has no embedded option.
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