Consider an MPT that is backed by 100 mortgages with average balance of $450,000 and monthly payment. The MPT has a WAC = 5% and WAM = 60 months. There is no servicing fee on this security. Assuming the prepayment model of CPR=5% and market rate is 3% (annual, investor discount rate), how much should this security sell for? Notes: as payments are monthly remember to convert CPR to SMM (constant for this example) and adjust the discount rate [Recommended to use Excel to derive cashflows each periods and then discount with NPV function]
Consider an MPT that is backed by 100 mortgages with average balance of $450,000 and monthly payment. The MPT has a WAC = 5% and WAM = 60 months. There is no servicing fee on this security. Assuming the prepayment model of CPR=5% and market rate is 3% (annual, investor discount rate), how much should this security sell for? Notes: as payments are monthly remember to convert CPR to SMM (constant for this example) and adjust the discount rate [Recommended to use Excel to derive cashflows each periods and then discount with NPV function]
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
Related questions
Question
![Consider an MPT that is backed by 100 mortgages with average balance of $450,000 and monthly payment. The MPT has a WAC = 5% and WAM
= 60 months. There is no servicing fee on this security. Assuming the prepayment model of CPR=5% and market rate is 3% (annual, investor
discount rate), how much should this security sell for?
Notes: as payments are monthly remember to convert CPR to SMM (constant for this example) and adjust the discount rate
[Recommended to use Excel to derive cashflows each periods and then discount with NPV function]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffdb6b7a1-1e81-4787-bf86-1e1e8b582305%2F854a3ea7-e611-4d72-af36-a4196d4d3628%2Fqsm14j8_processed.png&w=3840&q=75)
Transcribed Image Text:Consider an MPT that is backed by 100 mortgages with average balance of $450,000 and monthly payment. The MPT has a WAC = 5% and WAM
= 60 months. There is no servicing fee on this security. Assuming the prepayment model of CPR=5% and market rate is 3% (annual, investor
discount rate), how much should this security sell for?
Notes: as payments are monthly remember to convert CPR to SMM (constant for this example) and adjust the discount rate
[Recommended to use Excel to derive cashflows each periods and then discount with NPV function]
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Recommended textbooks for you
MATLAB: An Introduction with Applications
Statistics
ISBN:
9781119256830
Author:
Amos Gilat
Publisher:
John Wiley & Sons Inc
Probability and Statistics for Engineering and th…
Statistics
ISBN:
9781305251809
Author:
Jay L. Devore
Publisher:
Cengage Learning
Statistics for The Behavioral Sciences (MindTap C…
Statistics
ISBN:
9781305504912
Author:
Frederick J Gravetter, Larry B. Wallnau
Publisher:
Cengage Learning
MATLAB: An Introduction with Applications
Statistics
ISBN:
9781119256830
Author:
Amos Gilat
Publisher:
John Wiley & Sons Inc
Probability and Statistics for Engineering and th…
Statistics
ISBN:
9781305251809
Author:
Jay L. Devore
Publisher:
Cengage Learning
Statistics for The Behavioral Sciences (MindTap C…
Statistics
ISBN:
9781305504912
Author:
Frederick J Gravetter, Larry B. Wallnau
Publisher:
Cengage Learning
Elementary Statistics: Picturing the World (7th E…
Statistics
ISBN:
9780134683416
Author:
Ron Larson, Betsy Farber
Publisher:
PEARSON
The Basic Practice of Statistics
Statistics
ISBN:
9781319042578
Author:
David S. Moore, William I. Notz, Michael A. Fligner
Publisher:
W. H. Freeman
Introduction to the Practice of Statistics
Statistics
ISBN:
9781319013387
Author:
David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:
W. H. Freeman