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a)
To determine: The
a)
![Check Mark](/static/check-mark.png)
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)
![Check Mark](/static/check-mark.png)
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
EBK FINANCIAL MARKETS AND INSTITUTIONS
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
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