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?

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 2EP

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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
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Suppose you purchase a T-bills that is 125 days from maturity for $9,765. The T-bills has a face value of $10,000.a. Calculate the T-bills’s quoted discount rate. b. Calculate the T-bills’s annualized rate.c. Who are the major issuers of and investors in money market securities?
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Could you also include the formula that you use when working out the calculation, for example part A asks the new bond value, could you include a formula to show how this is calculated Consider a bank with the following balance sheet (M means million): Assets Value Duration of the Asset Convexity of the Asset 5yr bond bought at a yield of 3.4% (lending money) $550M 4.562 12.026 12yr bond bought at a yield of 4% (lending money) $800M 9.453 53.565 Liabilities Value Duration of the Liability Convexity of the Liability 2yr bond sold at a yield of 2.4% (borrowing money) $300M 1.941 2.384 4yr bond sold at a yield of 2.8% (borrowing money) $500M 3.759 8.206 Required a) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio; (Hint: equity to asset ratio = total equity/total asset) b) In a)’s scenario, to maintain the equity to asset…