Suppose Federal National Mortgage Association sells mortgage-backed securities (MBS) backed by a fixed-rate mortgage portfolio having the following features: Current mortgage balance = $300,000,000 Weighted average coupon rate (WAC) = 6% Weighted average maturity (WAM) = 360 months Current prepayment speed = 300 PSA Pass-through rate (PT Rate) = 5.4% What is the amount of total cash flows that the investors of the agency MBS receive in Month 2?

Suppose Federal National Mortgage Association sells mortgage-backed securities (MBS) backed by a fixed-rate mortgage portfolio having the following features: Current mortgage balance = $300,000,000 Weighted average coupon rate (WAC) = 6% Weighted average maturity (WAM) = 360 months Current prepayment speed = 300 PSA Pass-through rate (PT Rate) = 5.4% What is the amount of total cash flows that the investors of the agency MBS receive in Month 2?

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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Consider the sale for which the lender quoted a mortgage capitalization rate at 9.0%. If the equity capitalization rate is 15.0%, and the loan-to-value ratio is 80.0%, what is the overall capitalization rate? A. 10.2% B. 13.9% C. 24.0% D. The answer cannot be determined without the term of the mortgage.
Cost of debt with fees Kenny Enterprises will issue a bond with a par value of $1,000, a maturity of twenty years, and a coupon rate of 9.6% with semiannual payments, and will use an investment bank that charges $20 per bond for its services. What is the cost of debt for Kenny Enterprises at the following market prices? a. $959.56 b. $992.39 c. $1,060.96 d. $1,144.77 ACCES a. What is the cost of debt for Kenny Enterprises at a market price of $959.56? % (Round to two decimal places.)
Cost of debt with fees. Kenny Enterprises will issue a bond with a par value of$1,000, a maturity of twenty years, and a coupon rate of8.0%with semiannual payments, and will use an investment bank that charges$25per bond for its services. What is the cost of debt for Kenny Enterprises at the following market prices? a.$920b.$1,000c.$1,080d.$1,173
Term in years: Rate: 1 2 3 4 5 1.8% 2.25% 2.30% 2.66% 3.13% The table above shows the interest rates available from investing in risk-free U.S. Treasury securities with different investment terms. What is the present value (PV) of cash flows from an investment that yields $5,000 at the end of each year for the next four years? OA. $22,639 OB. $15,093 OC. $18,866 OD. $26,412
1. You follow the equity index HSI using an index fund in Hong Kong. You have signed an interest rate swap to exchange the capital gains (losses) from your portfolio, against a sequence of cash flows based on 3-month Libor plus 25 bp. The cash flows are exchanged every 90 days. All cash payments occur in Hong Kong dollars. The notional principal is 1 million. a. Draw the cash flow diagram for the first year. b. Let It be the value of the index at time t. Suppose you have the following data: I₁ = 23,850 I₁ = 24,000 Lo = 4.5% What is the net amount exchanged at period 1?
A firm has obtained a 3-year floating rate loan paying a premium of 2%. Given the prime rate is 5%. Immediately after the loan is taken, the prime rate increases to 6%. Which of the following is TRUE? Question 49 options: 1) The interest rate payable is 3%. 2) The interest rate payable is 5%. 3) The interest rate payable is 7%. 4) The interest rate payable is 8%.
1. Calculate profit of the bank if you know that: a. You accept deposit 1000 b. Obligatory reserve rate = 20% %3D c. Rate for deposit = 10% d. You invest as much as you can in bonds which have present value 80 and will be bought by 100 in year from now
Cost of debt with fees. Kenny Enterprises will issue a bond with a par value of $1,000, a maturity of twenty years, and a coupon rate of 11.2% with semiannual payments, and will use an investment bank that charges $30 per bond for its services. What is the cost of debt for Kenny Enterprises at the following market prices? a. $979.18 b. $1,009.76 c. $1,111.03 d. $1,147.97 a. What is the cost of debt for Kenny Enterprises at a market price of $979.18? ☐ % (Round to two decimal places.)
Assume that a lender offers a 30-year, $153,000 adjustable rate mortgage (ARM) with the following terms: Initial interest rate = 7.5 percent Index = one-year Treasuries Payments reset each year Margin = 2 percent Interest rate cap = 1 percent annually; 3 percent lifetime Discount points = 2 percent Fully amortizing; however, negative amortization allowed if interest rate caps reached Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2 = 7 percent; (BOY) 3 = 8.5 percent; (BOY) 4 = 9.5 percent; (BOY) 5 = 11 percent. Required: a. Compute the payments and loan balances for the ARM for the five-year period. b. Compute the yield for the ARM for the five-year period. Complete this question by entering your answers in the tabs below. Required A Required B Compute the payments and loan balances for the ARM for the five-year period. (Do not round intermediate calculations. Round "Payments" to 2 decimal places and "Loan Balance"…
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?
Suppose Federal National Mortgage Association sells mortgage-backed securities (MBS) backed by a fixed-rate mortgage portfolio having the following features: Current mortgage balance = $300,000,000 Weighted average coupon rate (WAC) = 6% Weighted average maturity (WAM) = 360 months Current prepayment speed = 300 PSA Pass-through rate (PT Rate) = 5.4% What is the total amount of mortgage payment by mortgage loan borrowers in Month 1? O a. $1,797,749.77 O b. $1,798,651.58 OC. $298,651.58 O d. $1,500.000
You are the manager of a £100 million portfolio, and you have 6 investment options: - First Mortgages: return 9% and risk score 3- Second Mortgages: return 12% and risk score 6- Personal Loans: return 15% and risk score 8- Commercial Loans: return 8% and risk score 2- Government Securities: return 6% and risk score 1- Saving Account: return 3% and risk score 0 The current regulation requires that the amount allocated in second mortgages and personal loans (combined) should not exceed the amount allocated in first mortages. Given this information: a) Ignoring the risk involved in the different investment options, what is the profit maximizing allocation of resources? What are the expected profits? b) Now, you have to consider the risk associated with the investments. The average risk of your portfolio cannot exceed 5. What is the profit maximizing allocation of resources? What are the expected profits?

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