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.

Question

Quizplus · Accepted Answer

Tranche A receives the first $10 million of cash flows, reducing its principal from $50 million to $40 million. Tranche B remains at $50 million.

The Following Information Is for a Collateralized Mortgage Obligation (CMO)