of a principal payment of $2,032,196 and interest of $1,286,325. At the beginning of month 81 (end of month 80), the principal balance for tranche A is $311,926. Therefore, $311,926 of the $2,032,196 of the principal payment from the collateral will be disbursed to tranche A.     After this payment is made, no additional principal payments are made to this tranche as the principal balance is zero. The remaining principal payment from the collateral, $1,720,271, is disbursed to tranche B. According to the assumed prepayment speed of 165 PSA, tranche B then begins receiving principal payments in month 81.     Exhibit 9.3 shows that tranche B is fully paid off by month 100, when tranche C begins to receive principal payments. Tranche C is not fully paid off until month 178, at which time tranche D begins receiving the remaining principal payments. The maturity (i.e., the time until the principal is fully paid off) for these four tranches assuming 165 PSA is 81 months for tranche A, 100 months for tranche B, 178 months for tranche C, and 357 months for tranche D. The principal pay down window for a tranche is the time period between the beginning and the ending of the principal payments to that tranche. So, for example, for tranche A, the principal pay down window would be month 1 to month 81 assuming 165 PSA. For tranche B it is from month 81 to month 100. In confirmation of trades involving CMOs, the principal pay down window is specified in terms of the ini- tial month that principal is expected to be received based on an assumed PSA speed to the final month that principal is expected to be received. Lets look at what has been accomplished by creating the CMO. First, earlier we saw that the average life of the passthrough is 8.76 years, assuming a prepayment speed of 165 PSA. Exhibit 9.4 reports the average life of the collateral and the four tranches assuming different prepayment speeds. Notice that the four tranches have average lives that are both shorter and longer than the collateral, thereby attracting investors who have a preference for an average life different from that of the collateral. There is still a major problem: there is considerable variability of the average life for the tranches. Well see how this can be tackled later on. However, there is some protection provided for each tranche against prepayment risk. This is because prioritizing the distribution of princi- pal (i.e., establishing the payment rules for principal) effectively protects     the shorter-term tranche A in this structure against extension risk. This protection must come from somewhere-it comes from the three other tranches. Similarly, tranches C and D provide protection against exten-