A mortgage pass-through security (PT) has a par value of $100,000, a 4% coupon paid monthly, and is based on 30 year mortgages. The current market rate for similar bonds is 3.5%, and prepayments currently equal $100 per month. Assume rates immediately rise to 4.5%, and prepayments drop to $40 as a result. The PT will now be paid off in month 310. What is the price of the PT today? Group of answer choices: $98,323.2214 $184,274.6844 $94,737.4877 $102,365.1248
A mortgage pass-through security (PT) has a par value of $100,000, a 4% coupon paid monthly, and is based on 30 year mortgages. The current market rate for similar bonds is 3.5%, and prepayments currently equal $100 per month. Assume rates immediately rise to 4.5%, and prepayments drop to $40 as a result. The PT will now be paid off in month 310. What is the price of the PT today? Group of answer choices: $98,323.2214 $184,274.6844 $94,737.4877 $102,365.1248
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
A mortgage pass-through security (PT) has a par value of $100,000, a 4% coupon paid monthly, and is based on 30 year mortgages. The current market rate for similar bonds is 3.5%, and prepayments currently equal $100 per month. Assume rates immediately rise to 4.5%, and prepayments drop to $40 as a result. The PT will now be paid off in month 310. What is the price of the PT today? Group of answer choices:
$98,323.2214
$184,274.6844
$94,737.4877
$102,365.1248
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education