Question: Suppose that 8% coupon pass-through are stripped into two classes. Class X-1 receives 75% of the principal and 10% of the interest. Class X-2 receives 25% of the principal and 90% of the interest.
a. What type of SMBS would this be?
b. What is the synthetic coupon rate on Class X-1?
c. What is the synthetic coupon rate on Class X-2?