ABC Bank originated a pool of containing 10 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 guarantee and servicing fee is 1%. 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 there are no prepayment and no default for the borrowers. If market interest rate is 5.5%, what is the price for each MPT security? PLEASE SOLVE USING EXCEL AND SHOW FORMULAS AND STEPS AND THE ANSWERS. THANK YOU
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- Please show step by step how to solve and all formulas. The Green Bank originates a pool of containing 100 30-year fixed-rate mortgages with loan amount of $250,000 each. All mortgages in the pool carry a rate of 6.5% with monthly payments. The servicing fee is 0.05% each month. The Green Bank would like to sell the pool to investors via MPT security. Suppose that they issue 150,000 shares of MPT security and the market interest rate is 6%. Questions A. Assume that there are no prepayment and no default, how much an investor would like to pay for each share of the MPT security? B. What is the price of each share of the MPT if there are a constant prepayment rate of 1.5% every month and no default? C. What is the price of each share of the MPT if there are a constant default rate of 1.5% every month (assuming the recovering rate is 50%) and no prepayment?Please show how to solve this using excel and please show all formulas to answer questions A. B. and C. The Green Bank originates a pool of containing 100 30-year fixed-rate mortgages with loan amount of $250,000 each. All mortgages in the pool carry a rate of 6.5% with monthly payments. The servicing fee is 0.05% each month. The Green Bank would like to sell the pool to investors via MPT security. Suppose that they issue 150,000 shares of MPT security and the market interest rate is 6%. A. Assume that there are no prepayment and no default, how much an investor would like to pay for each share of the MPT security? B. What is the price of each share of the MPT if there are a constant prepayment rate of 1.5% every month and no default? C. What is the price of each share of the MPT if there are a constant default rate of 1.5% every month (assuming the recovering rate is 50%) and no prepayment?Please solve this and show step by step how to solve to answer questions A. B. and C. The Green Bank originates a pool of containing 100 30-year fixed-rate mortgages with loan amount of $250,000 each. All mortgages in the pool carry a rate of 6.5% with monthly payments. The servicing fee is 0.05% each month. The Green Bank would like to sell the pool to investors via MPT security. Suppose that they issue 150,000 shares of MPT security and the market interest rate is 6%. A. Assume that there are no prepayment and no default, how much an investor would like to pay for each share of the MPT security? B. What is the price of each share of the MPT if there are a constant prepayment rate of 1.5% every month and no default? C. What is the price of each share of the MPT if there are a constant default rate of 1.5% every month (assuming the recovering rate is 50%) and no prepayment?
- An investor is considering the purchase of either an IO or PO strip from a CMO offering. The portion of the mortgage pool backing this tranche consists of $1,000,000 in mortgages with a remaining maturity of 10 years and an 8 percent interest rate.a. Assuming annual payments and a zero prepayment rate, prepare a schedule showing the IO and PO cash flows that would be payable to investors in this tranche. If the interest rate demanded by investors on this investment is also 8 percent, what would be the prices of the IO and PO strips?b. If interest rates increased to 10 percent and prepayments remained at a zero rate, how would the price of the IO and PO strips change? Which security, the IO or PO, exhibits the greatest price change from (a)? Why?c. Investor interest rates now decline to 6 percent. What is the price of the IO? PO? Prepayments now increase to a rate of 20 percent per year because mortgage borrowers in the pool begin to refinance at lower interest rates. What would prices…A customer asks a bank if it would be willing to commit to making the customer a one-year loan at an interest rate of 6.5% two years from now. To compensate for the costs of making the loan, the bank needs to charge two percentage points more than the expected interest rate on a Treasury bond with the same maturity if it is to make a profit. The bank estimates the liquidity (term) premium for one-, two-, and three-year bond to be 0%, 0.5%, and 1%, respectively. According to the Treasury yield curve below, what interest rate the loan must charge in order for the bank to make a profit on the loan? Should the manager be willing to make the commitment? Choose the closest answer below. Spot rate 6% 5% 4% Term 1-year 2-year 3-year O 7%; Yes O 8%; No O 5%: Yes O 6%; Yes O 7%; NoWhat is a “balanced portfolio” ? What kind of account allows people to invest small amounts of money into a large, professionally managed, balanced portfolio? Jack Abrams borrowed $8,000 for nine months at an interest rate of 7% (simple interest). The bank also charges a $100 processing fee. What is the actual interest rate for this loan? On September 30, 2019, Stinky Bank issued 10-year bonds at an annual simple interest rate of 4.25%, with interest paid twice a year. Pepe le Pew purchases a $10,000 bond. How much interest will Pepe earn every six months? How much interest will he earn over the 10-year life of the bond? Charlie Brown, a 25-year-old professional, invests $200 a month in the XYZ Capital Opportunity Fund, which has a 10-year average return of 8.75%. Charlie wants to estimate what he will have for retirement when he Is 60 years old if the rate stays constant. Assume monthly compounding. If Charlie makes no further deposits and makes no withdrawals after…
- Third Mortgage Investors makes money by purchasing mortgage backed securities (MBS), stripping them into interest only (IO) and principal only (PO) components, and selling the components for more than it paid for the original security. Suppose the company purchases a $100,000 Face value MBS carrying a coupon of 9 percent and a maturity of 30 years. Assume for the purpose of the following analysis, the MBS will make payments on an “ANNUAL BASIS.” What is the remaining principal balance on the MBS if it survives 1-year? 3-years? 5 years? 8 years?Third Mortgage Investors makes money by purchasing mortgage backed securities (MBS), stripping them into interest only (IO) and principal only (PO) components, and selling the components for more than it paid for the original security. Suppose the company purchases a $100,000 Face value MBS carrying a coupon of 9 percent and a maturity of 30 years. Assume for the purpose of the following analysis, the MBS will make payments on an “ANNUAL BASIS.” 1) What is the annual payment on the MBSA commercial bank invests in a loan with a current market value of $600,000 and a maturity of 3 years. The bank partially funds the loan by issuing a zero coupon bond with a maturity (principal) value of $450,000 and a duration of 3 years. The current market rate is 7% and interest rates are expected to increase by 1%. Which of the following statements is true? (a) The current equity value of the position is $150,000 and if interest rates increase the equity value will increase. (b) The current equity value of the position is $232,666 and if interest rates increase the equity value will increase. (c) The current equity value of the position is $232,666 and if interest rates increase the equity value will decrease. (d) The current equity value of the position is $150,000 and if interest rates increase the equity value will remain the same. (e) None of the given answers. The current equity value of the position is $232,666 and if interest rates increase the equity value will remain the…
- A client deposits 150,000 in a bank, with the bank agreeing to pay 6% annual effective for three years. The client indicates that one third of the account balance will be withdrawn at the end of the first year and half of the account balance will be withdrawn at the end of the second year. The bank can invest in either one year or three year zero coupon bonds. The one year bonds yield 7% and the three year bonds yield 10%. Develop an investment program based on immunization.Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of $31,950,000, with the promise to buy them back at a price of $32,000,000. a. Calculate the yield on the repo if it has a 5-day maturity. b. Calculate the yield on the repo if it has a 15-day maturity. (For all requirements, use 360 days in a year. Do not round intermediate calculations. Round your percentage answers to 5 decimal places. (e.g., 32.16161)) a. b. X Answer is complete but not entirely correct. Yield on the repo Yield on the repo 1.02857 % 0.34286 %Bank K is about to sign a loan agreement with a mining company.The current LIBOR rate is 8%.The risk premium for the company has been estimated as 3% and the origination fee will be 0.1875 percent.The bank will be requesting a 9% compensating balance requirement.If the reserve requirement is 6%,what is the promised gross return on the loan?