Question

ABC Bank originates a pool of containing 100 three-year fixed-rate mortgages with loan amount of $100,000...

ABC Bank originates a pool of containing 100 three-year fixed-rate mortgages with loan amount of $100,000 each. All mortgages in the pool carry a rate of 6% with annual payments. The servicing fee is charged 0.5%. ABC Bank would like to sell the pool to investors via Mortgage Pass Through (MPT) security. Suppose that 100,000 shares will be issued and the market interest rate is 5.5%.

Question:

Assume that there are no prepayment and no default, how much an investor would like to pay for each share of the MPT security?

What is the price of each share of the MPT if there are a constant prepayment rate of 1.5% each year and no default?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Please refer the sccreenshot uploaded

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Overseas bank is pooling 50 similar and fully amortized mortgages into a pass-through security. The face...
Overseas bank is pooling 50 similar and fully amortized mortgages into a pass-through security. The face value of each mortgage is $100,000 paying 180 monthly interest and principal payments at a fixed rate of 9 percent per annum. a. What is the monthly payment on the mortgage pass-through? b. For the first monthly payment, what are the interest and principal portions of the payment? c. If the entire mortgage pool is repaid after the second month, what is the second...
Overseas bank is pooling 50 similar and fully amortized mortgages into a pass-through security. The face...
Overseas bank is pooling 50 similar and fully amortized mortgages into a pass-through security. The face value of each mortgage is $100,000 paying 180 monthly interest and principal payments at a fixed rate of 9 percent per annum. a. What is the monthly payment on the mortgage pass-through? b. For the first monthly payment, what are the interest and principal portions of the payment? c. If the entire mortgage pool is repaid after the second month, what is the second...
Consider a sequential pay CMO that is backed by 100 mortgages with average balance of $150,000...
Consider a sequential pay CMO that is backed by 100 mortgages with average balance of $150,000 each. The mortgages have monthly payments with WAM = 30 years and WAC = 6%. There is a servicing fee of 0.4% and prepayment is according to 150% PSA. Tranche A holds $6,000,000 of the mortgage pool principal at origination, tranche B holds $3,000,000 and tranche Z holds $5,000,000. The rest of the pool principal is held by the SPV as a residual. The...
Consider a 1,000,000 (for convenience) GNMA pass-through security consisting of fresh 30-year fixed rate, fully amortizing...
Consider a 1,000,000 (for convenience) GNMA pass-through security consisting of fresh 30-year fixed rate, fully amortizing mortgages, with a WAC of 7%, and servicing/guarantee fees totaling 0.5%. Allow for a general PSA prepayment rate. a. Construct an IO/PO stripped MBS from this MPT above, showing the total cash flows to investors of each piece. For simplicity, price each piece so that the IRR at PSA 165 equals the MPT coupon. You must show your amortization table at a 165 PSA....
One hundred identical mortgages are pooled together into a pass-through security. Each mortgage has a $100,000...
One hundred identical mortgages are pooled together into a pass-through security. Each mortgage has a $100,000 principal, a fixed interest rate of 9% p.a. (paid monthly), and is fully amortized over a term of 30 years. Assume the bank charges servicing fees of 40 basis points and GNMA charges 10 bp to insure the timing of the payments. If investors expect no prepayment on these loans over the 30 years life of the pass-through, what should they pay for this...
Oh, and could you please show your work in as much detail as possible. I already...
Oh, and could you please show your work in as much detail as possible. I already kinda know the answer, I just want to see how you get it. Thank you so much!!! Edit: Thank you so much for trying to help me but I figured it out but I would appreciate your help in the following question. Thank You! One hundred identical mortgages are pooled together into a pass-through security. Each mortgage has a $100,000 principal, a fixed interest...
1. One advantage of Adjustable Rate Mortgages (ARM) is that a. lenders face lower levels of...
1. One advantage of Adjustable Rate Mortgages (ARM) is that a. lenders face lower levels of interest rate risk than a fixed rate mortgage. b. the outstanding loan balance can be adjusted regularly. c. the default risk of borrowers is lower than under a fixed rate mortgage. d. All of the above. 2. Gilbert takes out a 23-year adjustable rate mortgage loan for $6,000,000 with monthly payments. The first two years of the loan have a “teaser” rate of 2%,...
Multiple Choice 11. Prepayment risk is: A. the risk you will not receive the cash flows...
Multiple Choice 11. Prepayment risk is: A. the risk you will not receive the cash flows on a mortgage-backed security B. the risk that you will receive the cash flows sooner than expected and be forced to invest at a lower rate. C. the risk that you will receive the cash flows later than expected and not be able to invest at current, higher rates. 12. Based on the video Inside the Meltdown, it appeared that the main reason Lehman...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT