Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 13, Problem 13PS
Summary Introduction

To discuss: The manner in which these estimates used to compute an abnormal return.

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The Green Mortgage Company has originated a pool containing 75 ten-year fixed interest rate mortgages with an average balance of $103,200 each. All mortgages in the pool carry a coupon of 12 percent. (For simplicity, assume that all mortgage payments are made annually at 12 percent interest.) Green would now like to sell the pool to FNMA. Required: Assuming a constant annual prepayment rate of 10 percent (for simplicity, assume that prepayments are based on the pool balance at the end of each year), what would be the price that Green should obtain on the date of issuance if market interest rates were (1) 11 percent? (2) 12 percent? (3) 9 percent? Assume that five years have passed since the date in (a). What will the pool factor be? If market interest rates are 12 percent, what price can Green obtain then? Instead of selling the pool of mortgages in (a), Green decides to securitize the mortgages by issuing 100 pass-through securities. The coupon rate will be 11.5 percent and the…
Chewy, Inc. gas a gross profit of $500,000 and $140,000 in depreciation expense. Selling and administrative expense is $80,000. Given that the tax rate is 30 percent, compute the cash flow for the firm.
Dont answer i will unhelpful with incorrect values . please comment i will write values.
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