Find what is the present value of the PO MBS

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Problem 1) (Mortgage-Pass Throughs) Referring to the same mortgage pass-through of the previous question, what is the total amount of the prepayments if the rate of prepayments increases to 200 PSA?

Problem 2) (Principal-Only MBS and Interest-Only MBS) Suppose we construct principal-only (PO) and interest-only (1O) mortgage- backed securities (MBS) using the mortgage pass-through of the previous questions. Assume a prepayment multiplier of 100 PSA. What is the present value of the PO MBS if we use an annual risk-free rate of 4.5% to value the cash- flows?

Problem 3) (Principal-Only MBS and Interest-Only MBS) Referring to the previous question, what is the value of the IO MBS?

Reference no: EM132609130

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