a)
To determine: The
a)
Explanation of Solution
In this case 180(15 years x 12 months) monthly payments are there. The coupon rate at which each month in GNMA is 8.5% ‑ 0.5% = 8 percent per year, and the monthly GNMA pass‑through payment is:
Hence, the PMT is $95,565.21
The computation of current value of GNMA at a market rate of 5% is as follows:
b)
To compute: The present value of $10million if the GNMA is only half amortized and pass through 50% face value of mortgage pools.
b)
Explanation of Solution
While considering the GNMA is only half amortized. At the maturity of the GNMA the payment is lump sum that is same as 50 % face value of mortgage pools.
In case of amortization at which 50% the monthly payments of GNMA are:
The computation is as follows:
The computation of current value of GNMA at a market rate of 5% is as follow:
Hence, the present value is $12,623,051.35
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Chapter 24 Solutions
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