A pass-through is issued with the following characteristics:• Mortgage pool: $5 million•All mortgages are FRM at 10% per year, 3-year maturity, yearly paymentPass-through: $5 million, yearly payment•Fee payment: 1.5% of outstanding loan balance• Assume prepayment rate: 3% of the mortgage pool for the 1st year, 5% for the2nd yearFrom the information above, we have the following table:Year1Beginning Mortgage Interestbalancepayment payment$5,000,000 $2,010,574 500,000 $1,510,574 150,000PrincipalpaymentPre-paymentFeepayment$75,000 $1,935,574 $3,339,Payment to Endinginvestors balance2$3,339,426 1,924,146 $333,943 $1,590,203 $166,97150,091 $1,874,054 1,582,231,582,252$1,740,477 $158,225 1,582,252$0$23,734 $1,716,743What is the value of this pass-through at 8% discount rate?$5,168,900$4,339,025$5,000,000$4,761,703

present value of the future cash flows from the pass-through using the following formula:Present…

Answered: A pass-through is issued with the…

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

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